Oil has been dragging stocks down. Incorrectly. Smart people are getting confused by what to make of “supply & demand” these days… they assume there is somehow less demand and that’s signaling a global slowdown.
It’s because there is more supply… which could signal the beginning of the end of the horrible, terrible, monopolistic choke-hold the Middle East has held the world in.
Not only is that good news… but that’s GREAT news.
Oil is a proxy for energy… and the cost of energy affects the cost of EVERYTHING.
So when the price of oil goes down because we have new sources of supply, a several things happen:
(1) The cost of EVERYTHING goes down
(2) People have more money in their pockets to save & spend… and goodness knows the world spends
(3) More spending means more corporate profits
Think of it this way: Instead of paying a trillion dollars a year to the Middle East… we get to keep a lot of that money to save & spend on ourselves.
How in the world can anyone think that’s bad?
UPDATE: Maybe this whole post is moot? Maybe the market was just worried about the Fed… because since yesterday’s dovish comments, the stock market has gone up… while oil has continued to go down… to me an appropriate uncoupling that even Gwyneth Paltrow would be proud of. <smile>