DAVID KOTOK: Oil Could Fall To $15

Oil prices have hit six-year lows, and Cumberland Advisors' David Kotok thinks the worst may be yet to come.

"We could go back to $15 or $20, this is a downward slope, we don't know a bottom," Kotok said in a Monday morning interview on Bloomberg TV.

WTI crude oil futures are trading near $42 a barrel while Brent futures are just above $48 a barrel.

Kotok said that despite the oil industries apparent belief that things will get better, there is little reason for anything to change.

"Hope is not a strategy, it’s a myth," he said. "The fact is, we don’t have the drivers."

The good news is that there's good news. When asked about the lack of an increase in consumer spending despite the more favorable oil and gas prices, he said it will come.

More knowledgeable guys than me will have to answer those questions. I do know that EPA regs have made smaller refineries around the region go out out business because they were too small to economically meet the new laws.

So we are hostage to BP Whiting. I told folks here in central Indiana that when the Marathon Rock Island Refinery in Indianapolis closed in 1993 it was a bad omen.

Yeah, they couldn’t even get one pack each of cigarettes now. I’m glad I quit smoking in ‘73.

In ‘65, after I was released from active duty I used to pull up to a drivein and honk my horn and a curbhop would come to the car, I would order a cheeseburger, fries and a can of beer and give him one dollar and say, “Keep the change.” He would reply, “Thank you sir.”

I find it amazing how many people seem to miss the mark so far on what inflation has done to us. I was watching something on TV where an “expert” commentator actually said that a thousand dollars circa 1890 was worth five to ten thousand dollars now. That is ridiculous, that ratio won’t even get you back to 1968. The truth for 1890 is at least one hundred to one. I can’t imagine where he got that absurd number, it is a known fact that people in that era worked for about a dollar a day generally, that is the origin of the old saying, “Another day, another dollar.” On January 5, 1914 Henry Ford announced that workers who qualified would be paid five dollars per day for an eight hour day and turned the world upside down. Ford actually had people go to the workers homes to see how they lived and advise them on how to manage the magnificent income they would be receiving, anyone who did not agree to that would not be paid five dollars per day. One year at that unheard of pay rate was, in nominal terms, only enough to qualify as a decent week’s pay now, in one month it was not even enough to call a good day now. I was born in 1944 and I can recall being with my father at a service station when I was little over knee high to his six foot two frame and having a man come up to him to tell him how well things were going for him, he had been hired at one dollar per hour and was very happy about it. Ten times that now is a pittance. What he earned in a month won’t buy any more groceries than I can carry now and I am 71 years old. Back then you would have needed a half ton pickup truck with side planks to haul that many dollar’s worth from the grocery store.

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