Tuesday, September 2, 2008

What's Going on With Oil?

Oil dropped precipitously today, off as much as $9 in today's trading.  This seems to be the exact opposite of what happened just a few months ago as oil skyrocketed to over $140 a barrel.  What's going on.  I believe it is two things.

Normal market activity.  There was definitely speculation on the way up.  There is now the reverse trend happening.  This is a GOOD thing.  Over the last few months, "speculation" has become a dirty word.  However, I am of the belief that it is a good thing when markets are allowed to function the way they are designed to do.  This is exactly why.  As fast as the market was able to go up, the market is able to take it back down.  While this volatility may be painful to some, it allows there to be liquidity in the market.

The dollar is getting stronger.  Don't look now, but there have been a few weeks of sustained gains by the dollar after years of a downtrend against the Euro.  As much as I'm not a fan of the U.S. market, the foreign markets are looking equally weak.  I have a lot of money invested in foreign funds, so this is probably not a good trend for me.  Just might be one of those things where I have always imagined that the grass was greener when it probably was not.  If this continues, I will probably try to make a bet on the dollar.  Easiest way to do this is to play the dollar ETF, UUP.

What do you think?  Do you think it likely that the US economy will perform better than foreign economies over the next few years?


  1. I think there's a direct correlation between the US dollar and the Euro... in the sense that US economy affects foreign economy; If Americans have less spending power, that means Americans will spend less nationally and internationally.

  2. It is hard to compete with the Euro and if the war continues, I think our economy will continue to slide.