Posted on 12/14/2014 7:43:31 AM PST by expat_panama
So while nobody knows the future we still need to know what to expect from the week's two big headlines, even though our view can easily (and will probably) be muddied w/ other factors. So we deal with an unknown future by checking the historical record for clues on at what the news means to our future investment returns.
What oil bargains do: namely, what's it doing to the economy and to investments; here's what tanking oil's done in the past (ya gotta LOVE the fed's data site) and how real oil prices (2014$ per barrel) track real GDP--
[click to enlarge]
--and what we got is that it's the oil price surge that precedes a recession while crashing oil is what comes to the rescue afterword. True, there's more to econ growth than oil (wars and stuff) and sometimes econ growth can launch oil prices right back into orbit. Just the same, cyclical economic patterns come and go. We deal with it.
I
n the mean time right now we got $60 oil and we're wondering about what that means for our 2015 investment returns. That track record's next on the right:
Someone please tell me if they're seeing something that I'm missing, but I believe I'm getting the same thing for stocks as w/ GDP. Namely, that a price surge is what tanks stocks and an oil price plunge (or prolonged era of low prices) does quite well thank you.
My first glance made me sing the old "...but this time is different..." tune because of how "this time" we've just been having several years of rising stock prices. My problem is that I'd been looking at this graph --with the S&P on a linear plot. In stocks we care about our gains --what percent we're doing now. A log plot shows percent increases better, so using the log plot at the right we can ask what a few years of $40 oil will do, and look at the long term oil price decline from Reagan thru Clinton. It made great gains even better.
Until the '99 oil rally that is, and then we had a dot.com bust. Still, I personally wouldn't mind another five years of super gains, even w/ another dot.com at the end.
More tax'n'spending: --and the other big headline being the fact that the House caved and gave the budget busters everything they wanted and the big question is what has this done in the past.
Answer: nothing.
OK, so why nothing? The answer is that (w/ few rare exceptions) the extreme left has controlled taxes & spending pretty much continuously for decades and that there's no way of seeing how a few years of budget restraint could have affected GDP and stocks. Sure, we know that big tax cuts (for those that remember that far back) did wonders for our personal lives and our ability to save and invest. We also know how increased investment w/ lower costs affect business activity. It might happen in the future and we can simply agree it would be great. It's not happening now, it hasn't happened before, and we're still here. We need to remember the enormous economic power of the American people and how we can build and prosper even during loooong stretches of abysmal government leadership.
In the meantime right now stocks are crashing ("market under pressure") and metals are continuing a month of solid gains. That can change.
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This is the thread where folks swap ideas on savings and investment --here's a list of popular investing links that freepers have posted here and tomorrow morning we'll go on with our--
Open invitation continues always for idea-input for the thread, this being a joint effort works well. Keywords: financial, WallStreet, stockmarket, economy. |
h/t to Lurkina.n.Learnin for asking us this question (here).
” However, beyond a certain point prices falling will threaten the domestic industry that led to that manufacturing renaissance and we appear to have reached that point, so it’s become a bad thing from my perspective. The price per bbl of oil needs to remain in viable territory for domestic fracking to continue and expand. Falling price can be bad and is for this reason.”
Well, here is another look at falling oil prices. The best our Economy did last century was during Reagan’s years and the price of oil tanked.
Crashing Oil Prices Will Be Terrible ONLY For A Tiny Part Of The US Economy
http://www.businessinsider.com/energy-investment-a-small-share-of-gdp-2014-12
Had an employee quit today... Damn. Great guy. Anyone know of any good FP&A people in Atlanta looking for a new gig?
BTW NAHB was not good news. Neither is WTI. If you were long USCRUB you are having a good day :-)
Yep, that’s typical a decision tree for investors and business people. It’s hard to Monday Morning QB decisions that were totally sound given all the available data, then the market changes. That’s the history of markets, all of them not just stocks and bonds. How many guys sold out just in time?
Once I make a decision I will tweak it as time goes on, but I don’t second guess it or look at somebody else’s portfolio, life or spouse. I’ve had to drink plenty of lemonade, but I’m happy with the things that really matter. If money’s your scorecard, you’ll never have enough and it really doesn’t buy happiness.
Anyhoo, last Thurs the quarterly Flow of Funds report came out and it snuck right by me. The reason the extreme left media kept mum is all the bad economic news:
But there is a price at which it becomes a screaming buy. The trick is figuring out what is the number.
huh —very low unemployment rate among the competent.
I know... it’s going to be very hard to replace him... very difficult to find competent people.
Almost there.
Ruble tumbles 9.5% to new record low despite interventions
http://www.freerepublic.com/focus/f-news/3237466/posts
Russia increased rates to 17% from 10.5% as per Bloomberg.
Oops
Sorry, Putin. Russia’s economy is doomed
http://www.washingtonpost.com/blogs/wonkblog/wp/2014/12/15/russias-economy-is-doomed-its-that-simple/
Good Morning --stock index futures are really upbeat today @ +0.31% today!!
Promises promises. They were upbeat yesterday morning too and we they got slammed enough for IBD ro rate this officially market in correction. fwiw, futures are down for metals this AM, but inspite of the hooplah they've also been sagging lately w/ silver heading back toward $16 and gold stuck at $1,200.
Humph. So while today we'll hear from Housing Starts, Building Permits my thinking is that (like we've seen before) investors would still be doing better buying at the "correction" and selling at the "uptrend".
Warning: past performance is no guarantee of future returns.
Hey no problem because we can all sit back and enjoy this NASA video that's gone viral --my daughter's in it and she & her coworkers put together...
Futures have turned negative, while oil is also down.
So what about money, Jake?” Gekko challenges him. “You like her?”
“Do I like her?” Jake sputters. “I’ve never thought about money as a she.”
“Oh,” Gekko says. “She lies there at night in bed with you, looking at you, one eye open — money never sleeps.”
You’re right —indexes -0.08, all markets -0.23; pretty good day for short sales maybe...
Hope none of you are trading USDRUB - Adult Swim Only... gracious that chart is a MESS!
Good Video! So I assume daughter is the cute one?
Right. The idea is that it’s good to have a really smart parent and a really good looking parent and my daughter got it all —she got the good looks from the wife, the terrific brains from my wife, and she inherited my exceptionally good luck...
I’d rather have lucky generals. ;-]
LOL I saw that video yesterday. Didn’t knew there was a STAR in it! ;-)
This oil price collapse is bringing us an investment opportunity the likes of which I didn’t think I’d see again. I don’t for a minute believe this low price will last... in the long term.
I could see it falling a little further... $50. Maybe even lower... $42 was the low close from 2009 ($37.5 Intra-day). 6 months from now, does anyone really believe Oil will still be below $50? I don’t.
IMO, this collapse is a coordinated event... planned by the US, with help from the Saudis, to punish Putin and slow the development of shale oil and LNG in the US. It’s working, too....
Of course, the question is: How long does this game go on? When the price starts to go back up, it will move quickly. But, that might yet be a while.
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