Friday, September 24, 2010

Stock Market vs. Crude Oil

Dow: +1.86%
Nasdaq: +2.33%
S&P 500: +2.12%

That's today's good news. Here's today's bad news.

September 24, 2010
Crude Oil Futures Increase Most in Two Weeks as Dollar Slips Against Euro

Crude oil rose the most in two weeks as the dollar dropped against the euro, bolstering the appeal of commodities as an alternative investment.

I continue to be a disbeliever in commodity driven stock markets.

I still lean deflationary. Oil prices are lower now than when I turned deflationary back in November (WTI Cushing Spot was $79.44 that day). I'm comfortable remaining deflationary through yet another Christmas.

Source Data:
EIA: Historical Oil Prices
St. Louis Fed: CPI-U


EconomicDisconnect said...

Look, you know I am not a commodities guy but the rise in those things is bad news! Oil too!

I just cannot figure out the euphoria out there, unless it is forced.

Loved the Breakfast Club reference!

"You are leaving without the answers you sought?"
"You said there were none."
"Yes, but you asked the wrong questions!"

Stagflationary Mark said...


"I just cannot figure out the euphoria out there, unless it is forced."

I think the thinking is that if the dollar fell 90% then the stock market would rise 1000%. 0.1 x 10.0 = 1.0. See how good things would be? It would be like nothing changed.

Of course, oil would also rise 1000%. Would the stock market bulls really like $750 oil? Good luck liking that one!

"Do you know how few vampires have the stamina for immortality?" - Interview with the Vampire

Anonymous said...

The US dollar, long-term, has to fall. Everyone has been avoiding this as much as they can, to the point where Germany probably welcomed Greece's troubles if it means a weak Euro.

But until the twin deficits are fixed structurally, the US dollar will keep falling.

remy said...

I agree that a weak dollar is great for the economy... but from whatI can see, there are many things (together or alone) that can go wrong that will prop up the US dollar:

1. china bubble collapse (over production)
2. Dubai commercial real estate collapse (over production)
3. Another Euro country banking issue
4. Gold bubble collapse
5. new war(s)?
6. new US recession

I think it would be risky to bet against the dollar.

just my 2 cents.


Stagflationary Mark said...

Anonymous & Remy,

For what it is worth, I agree with both of you.

My IRA sits in short-term cash awaiting a better reentry point into long-term inflation protected Treasuries.

I expect (and expected) the move to cash to be a slightly losing trade but as Soros once said... it is about how much you make when you are right vs. how much you lose when you are wrong.