Monday, June 09, 2008
It's Worse Than You Think!
The heading of this post is the headline for this week's Newsweek cover story on oil and the economy. Bottom line: Newsweek and its panel of experts have decided that any hope for economic recovery (from a recession that hasn't actually happened yet!) is forlorn and should be abandoned while we still have time to save ourselves from disaster.
Below the Newsweek cover you will see the two latest cover stories from Business Week and from The Economist. Both are about the story which is in the forefront of public consciousness at the moment- super high prices for gasoline and for crude oil.
I think there has been a partial recovery from the extremely bearish sentiment on the stock market and the economy which prevailed during the first quarter of 2008 and upon which I commented in 9 posts during the January-March period. These posts can all be found here. However, I don't think it will take much to turn sentiment quite a bit more bearish. The Newseek cover illustrates this point. So I believe that the March low in the S&P near 1250 will hold and that a move to 1500 or higher will develop from the low of the reaction which is currently underway.
Public attention is increasingly focused on the $200 per barrel level in crude. I don't think we'll even get close to that price. In fact the current extreme level of volatility in crude oil futures tells me that the top is close at hand and will almost surely develop below the $150 level. There is even a good chance that last Friday's $10 rally to $139 marked the end of the bull market in crude.