Well, like most folks who celebrate these holidays, I stepped out of my normal life and into a world of over consumption and lots of sitting around sipping. Yup, I feel sluggish, a bit heavy, and, well, tired today. Given that, I want to make just a couple of quick points for consideration before heading into the weekend for more overconsumption and sitting around sipping.
- Consider that the Dow Jones Industrial Average went from a mere 6,547 in March 2009 to 18,000 today. That’s almost three times higher in just under six years. That’s a huge, meteoric, supersonic rise.
I have heard this before – the market is ripe for a fall because it has climbed so much in the last five years. This is ludicrous. The only reason the Dow went to 6,547 is the panic around the Financial Collapse. If it had just been the recession that began in December 2007, the market would have never fallen that far. Fundamentally speaking, the market was way, way undervalued.
In fact, in December of 2007, the Dow stood just under 14,000, so, if you want to compare apples, the Dow has only increased some 4,000 points in just under six years. Putting a percentage to that of 28%, the rise is not as impressive as 300%.
- The fog is starting to lift on the other side of reality, however, and as it turns out, we’re not completely swimming in oil after all. The pace of growth in U.S. output is apt to slow sooner than most realize too, and by more than most investors seem to realize. Actually, we may well already be there.
The above postulates that the current demise in the price of oil is not about supply and demand; rather it is about speculation and a traders impulse to flee a sinking ship.
- Traders have only started to correct their mistake by not allowing crude oil to slip below $54.00. But, I’ve got a feeling all we need is a good nudge above $60 to get this pendulum swinging back in the other direction again. Look for it, and fairly soon.
Perhaps, but there is another reality to consider. There is right now plenty of supply to go around and the numbers on demand are ambiguous, to say the least, even from the US government. Logically, though, it is reasonable to assume US demand is lessening as more fuel-efficient cars hit the road, natural gas and electric cars become more common, and alternative power sources replace oil as a means of power.
It is also logical to assume that Europe and Asia will use less, far less oil as they move on the same plane as the US. So, we will see if oil spikes back up, but my guess is it won’t, at least not soon.
- The 2014 holiday season showed steady growth over the last year on strong demand for jewelry and women’s apparel, according to data published by MasterCard Advisors SpendingPulse, which tracks customer spending during the holiday season.
- Retail sales during Black Friday through Christmas Eve increased 5.5 percent, in line with forecasts,
And so it goes. The tune in the breathless media is changing with the numbers. More and more talking heads and celebrity analysts are now saying what many of us have known for some time – the US is on the way to boom town.
P.S. The Russell 2000 is now past its 52-week high.
Trade in the day; invest in your life …
