The sharp fall in oil prices engineered by Saudi Arabia will likely be fairly short-lived, and indeed it should set the stage for the next major rally in oil. While prices could stay low for another six to nine months or perhaps a little longer, odds look good that within the next 12 to 18 months oil prices will rise much closer to their all-time highs from current levels. Moreover, oil’s drop has shortened the time it will take for commodity prices in general, whose correction began in 2011 with Europe’s recession, to bottom. All this has important implications for the short- and longer-term geopolitical and economic outlook and for U.S. investors. For the U.S., the lower oil prices are a mixed blessing. On one hand, they will put extra cash in U.S. consumers’ pockets; on the other, the country’s most dynamic industry, energy production, will crumble. For investors, we’ll note that since OPEC first flexed its muscle in the early 1970s, U.S. stock markets have never experienced major declines concurrent with a bear market in oil prices. The two economies that will benefit the most are Europe—at least over the shorter term—and China. Both are major oil importers, and lower oil prices are a free shot in their economic arm, giving consumers extra cash without the government laying out a penny. But China stands out as the biggest winner by far, with the drop in oil a multifold blessing over the shorter and longer terms alike. It not only hands Chinese consumers a de facto tax cut; it also gives the yuan more freedom to follow its upward trajectory. This further boosts consumer demand while allowing China to import all the military and other technology it craves. Better times in Europe will also help offset the higher yuan as European consumer spending picks up. As a bonus, China gets to buy oil on the cheap Read More

The sharp fall in oil prices engineered by Saudi Arabia will likely be fairly short-lived, and indeed it should set the stage for the next major rally in oil. While prices could stay low for another six to nine months or perhaps a little longer, odds look good that within the next 12 to 18 months oil prices will rise much closer to their all-time highs from current levels. Moreover, oil’s drop has shortened the time it will take for commodity prices in general, whose correction began in 2011 with Europe’s recession, to bottom. All this has important implications for the short- and longer-term geopolitical and economic outlook and for U.S. investors. For the U.S., the lower oil prices are a mixed blessing. On one hand, they will put extra cash in U.S. consumers’ pockets; on the other, the country’s most dynamic industry, energy production, will crumble. For investors, we’ll note that since OPEC first flexed its muscle in the early 1970s, U.S. stock markets have never experienced major declines concurrent with a bear market in oil prices. The two economies that will benefit the most are Europe—at least over the shorter term—and China. Both are major oil importers, and lower oil prices are a free shot in their economic arm, giving consumers extra cash without the government laying out a penny. But China stands out as the biggest winner by far, with the drop in oil a multifold blessing over the shorter and longer terms alike. It not only hands Chinese consumers a de facto tax cut; it also gives the yuan more freedom to follow its upward trajectory. This further boosts consumer demand while allowing China to import all the military and other technology it craves. Better times in Europe will also help offset the higher yuan as European consumer spending picks up. As a bonus, China gets to buy oil on the cheap Read More

Contrary to what you might think, this is a tough time of the year to attempt to make market calls (not that it’s ever easy, mind you). As is common knowledge, stocks tend to rise at this time of year. In fact, since 1950 the Dow Industrials have advanced about… Read More

Average Annualized Return Per Closed Trade: 32.3% Average Return Per Closed Trade: 19.0% Average Holding Period: 226 days Oil ministers from OPEC met yesterday and decided to keep its production level unchanged. Prior to the summit, Saudi Arabia, the largest producer in OPEC, had already signaled that… Read More

Data from the U.S. Commerce Department this morning confirms that the economy enjoyed its strongest back-to-back quarterly showing in more than a decade. Commerce revised upward third quarter GDP by 0.4 percent to 3.9 percent thanks to a build in inventories and an uptick in consumer spending. The current quarter… Read More

Average Annualized Return Per Closed Trade: 32.3% Average Return Per Closed Trade: 19.0% Average Holding Period: 226 days The stock market opened in a jovial mood today thanks to China’s unexpected move to support growth via lower interest rates. The People’s Bank of China decreased the one-year… Read More

Remember the drastic moves Japan announced a few weeks ago to reinvigorate and re-inflate its economy? Well, it looks like Japan must do even more work. We learned the other day that its economy slipped into recession yet again last quarter, having contracted at a 1.6 percent annualized rate in… Read More