Saturday, 5 March 2011
Stock are falling as oil price soars back again to dangerous levels.
How to make sense of all of this in regard to the common stock investor?
First there’s the short run effect which is largely the fear driven by what might happen in oil prices and second there’s the longer term which is the US economy is slowly but surely gathering momentum. The outlook for the economy is more positive than ever despite the middle east crisis. Corporations and stocks are doing well.
So for the near term, is this an opportunity to buy?
The stock market volatility that we have been experiencing lately, the seesaw effect in chart patterns is mainly due to the unsettling in Saudi Arabia. The bull market remains intact. The best move is to wait a little longer, there is some very scary stuff going on the middle east, and if we truly do get unrested in Saudi Arabia, that is going to be very negative for the market.
We need to look beyond the 2% oil production of Libya. The Saudis have the captivity to make up for issues elsewhere in the world, if there is going to be issues in Saudi Arabia, that would be a major negative move for the stock, and it would be cautious to wait until it plays out.
Of course there are a lot of speculations that is driving the oil price higher, and we do have momentum buyers in the commodities, but people initially got concerned with Saudi Arabia when Egypt’s crisis happened and that seemed to reflect a bit on Saudi Arabia, and when the rumors of demonstration in the outer city’s of Saudi Arabia started, the stock market went down. Issues in Saudi Arabia are what drove this market down.
The inflow and outflow of ETF’s have been particularly busy in the oil stocks, and if oil keeps going up the global economy will slow down rather noticeably as we approach the 120$ a barrel.
The important thing we need to understand is energy stocks may not be necessarily beneficiary if you get a global slowdown.
Investing in companies with great yield is a smart choice for investors, might as well get paid the way, companies like Wall mart, BlackRock Kelso Capital ( BKCC ). These will give you a little protection against a stock market correction.
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