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Clear Thoughts
Another look at Oil
| Oil, interest rates, jobs and stocks. |
Oil has become a necessity in our society. We rely on it to drive our cars, heat our homes, transport goods, and the list goes on. There are also other not so clear effects oil has on our society.
Recently, the government ordered the release of oil from our strategic reserves. Despite this feeble attempt to control the surging prices, which we believe to be more symbolic than effective, we hear government analysts project that gas and home heating oil will come down to only about 50% more than prices were last year by the middle of the fourth quarter.
We understand the effects of the hurricane; that the demand for energy from India and China is real; and that global growth requires more energy. However, our government has never implemented a realistic energy policy geared toward lessening our dependence on oil for our enormous energy needs, and now we are beginning to pay the price.
New statistics are showing that with rising energy costs and the tightening labor market that inflation is once again becoming a concern to our economy. The opinion of this author is that raising interest rates will only hurt the market, slow refinancing and new home construction and ultimately hurt the overall economy.
Rising interest rates help the dollar which is a mixed blessing, making our goods more expensive overseas, and foreign goods less expensive here. On the flip side it makes investing in our stocks and bonds more desirable for foreign investors stimulating our securities trading markets.
Sitting in our perch we do not want to worry that too many people will find jobs. We think that the government should take a look past the economic figures that are reported and focus more on current events such as the effects that hurricane Katrina is having on our economy and more importantly the American citizens who have suffered in this natural disaster.
We need jobs to have the purchasing power to afford higher energy costs. We do not need higher interest rates to stem inflation, at the cost of jobs, the housing market and corporate borrowing rates, all of which will wreak havoc in the markets and ultimately hurt our pocketbooks.
At Clear Asset Management, our investment strategies focus on buying the best performing stocks at any given time. Recently, many of these stocks have been related to the energy industry including; oil, gas, coal, nuclear assets, refiners, service firms, etc. and we have done well for our investors. We will continue to invest in these stocks, as long as they remain highly ranked and likely to deliver benchmark beating results.
We also hope that energy prices become reasonable, the economy grows and the government and Fed act with level heads before their next moves. |
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