Dow Inverse To Crude, Legit?

[Marcia Langley]

I understand the magnitude of the oil prices/crises and how that affects literally everything else (especially consumers and business expense) but the Dow investors seem to have settled on oil as the only thing that can move them.

My gut just tells me this is not legitimate. I rather see high oil as just one big factor in the overall economic crises (panic). Not the only factor. The months-long huge run up in oil prices was a major deal, I know. But a few bucks correction seems to send the Dow into euphoria. Oil is still extremely high and there is no indication it will return to anything truly acceptable for a really long time.

This week has had some of the worst economic news yet but oil seems to be the only thing driving the DOW.

As a side note, I also think congress is using oil as a distractor from the more serious concerns of the financial systems. Congress is good at distracting citizens from the scarier stuff by feeding their fears about something everyone can choose up sides on.

Neither congress nor anyone else (especially not any candidates) can do much about the banking crisis, most of them do not even understand it. But they are no better on the oil price crisis, if you ask me.

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What do you guys think about the Dow tracking so closely with oil?

I'm thinking that the irrationality of the market has reached a new level of not having any discernable reflection of reality at all.

 

[Pamela Crowley (Florida)]

It's just another dog and pony show to fool the masses.

 

[PropertyEconomics]

I personally find it interesting that the oil prices have decreased while Congress is in recess, ie back home talking to their constituents, SEE WE ARE DOING SOMETHING ... then they go back in session, away from those that sent them there and UP UP AND AWAY ..... that is my guess.
If the Gang of 10 dont get a vote on the floor of the house after recess, I think Americans will be more than happy to tell them all what they think in November.

My strongest suggestion to you all, and yes I know some good will be tossed out with the bad, when you go into the voting booth and you see (i) besides someones name, vote for the other person. Its time we ALL send a message and that is we are tired of this crap. You had your chance now go home and pay high gas prices like the rest of us. Maybe if they get sent home, they will understand our plight.

Also for what its worth, thinking that speculators are losing money is a farce at this point. They made money all the way up and they will sell short and make money all the way down. They did in the financial crisis they caused in the housing market ... now its their turn with oil prices.

 

[The Warrior Monk]

Well, it is the Dow Jones Industrial Average. There are some financial companies in there, but they are some of the better ones.

The price of oil, for the most part, is not going to stop the damage in the financial sector, which, IMO, is far from over. Simply look at Fannie's most recent reported loss. There are going to be plenty more of those type of reported losses from them and a whole host of other lenders.

 

[Marcia Langley]

Also for what its worth, thinking that speculators are losing money is a farce at this point. They made money all the way up and they will sell short and make money all the way down. They did in the financial crisis they caused in the housing market ... now its their turn with oil prices.

I know that's true. It's the poor suckers who were conservative and well diversified and never looked at their IRA (just trusted their advisor/manager) that will suffer the most.

 

[PropertyEconomics]

Well, it is the Dow Jones Industrial Average. There are some financial companies in there, but they are some of the better ones.

The price of oil, for the most part, is not going to stop the damage in the financial sector, which, IMO, is far from over. Simply look at Fannie's most recent reported loss. There are going to be plenty more of those type of reported losses from them and a whole host of other lenders.

Do you see a movement here to Nationalize everything? Very scary David. When you see the takeover of Fannie and Freddie .. its only the start.

 

[TJSum]

Yes, oil is that important. As much as the powers to be deny it, it is the reason we are at war in the middle east and will be for a long time (until alternate sources of energy take over).

The price of energy affects almost everything else directly. For those segments not affected directly, they are still hurt indirectly. For example, restaurants take a beating because the average family disposable income is eaten up by higher energy prices, so less people can afford to eat out. It affects everything.

The past year the economy has faced two major crisis, the banking turmoil and energy prices fueling inflation. The way the government can try to help with either of these, the cures are the opposite. The lower the interest rates, the better for the banks and real estate with their crisis, but in order to lower energy prices higher interest rates are needed to slow down inflation and demand.

If fuel prices get back to reasonable levels, it would free up the politicans/government to attack the banking crisis with lower interest rates. Yes, oil is that important...

 

[farmguy]

The actions of the fed's counterparts overseas has some impact as well. Several met recently and did not raise rates. The dollar strengthened an oil fell. We finance a bunch of oil guys buying play pretties. They all say the fundamentals support oil at about $80 a barrel.

There is a little bit of doble edged sword here. If dollar strengthens, oil falls, our exports get expensive. That has been the one strong point we still had going for us.

 

[moh malekpour]

It is not the supply of oil that causes the oil price to go up or down. There is enough oil in the ground all over the world for many years to come. It is the demand for oil that causes the prices go up or down and it is not the US demand but the worldwide demand. China and India are on their way to growth and their thirst for oil increase daily in the way that world oil market cannot catch up with their demands. The only way to slow down that demand is to slow down their growth. When there is a recession or slow down in growth, there is less developing, less building and less demand for oil. I don't predict the worldwide slow down demand for oil so the oil price is not going to come down to price of $40 or $50 per barrel. It is going to stay above $100 which is sill too high but it is better than $140.
The recent decline on oil price is due to slower growth in US and the world. This week, I bought a gallon of milk 30 cents cheaper than two weeks ago in the same store. This was as the result of lower oil price.

 

[The Warrior Monk]

Do you see a movement here to Nationalize everything?

It's actually comical, given that countries like China are moving away from nationalization.