By Jonathan M. Lamb 12-17-14
I wrote on November 12th to start thinking about taking some stuff off the table as the DOW JONES was at 17,604. The market continued to rally after I wrote that just falling short of 18,000 before we started to reverse and lost almost 1,000 points as yesterday the market closed just above 17,000. Timing the market is next to impossible but you have to look at the larger picture and not chase the market, so the million dollar question remains…what is next?
First lower oil is a GOOD thing for the American consumer. The “market” does not like cheap oil, and our current prices are too low. As I wrote on December 3rd a good equilibrium price for oil is in the $70 range. With that I said that we can go below $50 and above $100, but in the long run producers lose where we are now and will stop producing (or go out of business) in the long run (but are willing to take short term losses) thus driving up prices, and then the cycle repeats where they over shoot supply and demand and prices have to correct again.
So after the market digests the price of oil and the market wakes up that this is good for consumers the market should move back up. It could be a “while” before the market prices this in, and before it can we need to know where oil settles. The problem becomes with more money in the pocket of the American consumer and a market rally sometime in 2015 the “market” will have to wake up and realize that Americans live in a bubble and there is a big world out there with lots of “problems” which can cause a big shake up. So in the short term (next 6 months or so) low oil is good, in the long run (sometime in 2015) we will have a global shake up which cause some “market” problems. Only the crystal ball knows when, but one thing is for sure….prices will go up and down, and up and down. Know your investment and retirement strategy, as 2015 is sure to be a fun year for those of us that like volatility…