8.15.08
This was a consolidation week where the market was digesting its previous gains. The Dow ended the week down fractionally while the other major indices were up slightly with the Russell 2000 being the only standout, up 2.6%. The market was moving the way that we like it to. Higher “highs” and higher “lows” is always a good sign.
We are seeing the “Dollar gaining against the Euro, while Oil and Gold are getting crushed. Oil traded as low as $111 a barrel, closing at $113, down from its all time high of $147 just a few weeks ago. . Oil prices are now down 23% from the high they hit July 11.
To show you the impact of lower Oil prices; FOR EVERY DOLLAR THAT OIL DROPS, THERE IS A SAVINGS OF $4 BILLION TO THE CONSUMER. THIS FIGURES OUT TO $134 BILLION LEFT IN THE POCKETS OF AMERICAN CONSUMERS SINCE OIL HIT ITS HIGH ON JULY 11th.
This money will be spent in other than the local gas stations and will get the economy going again. We have seen the price of unleaded gas drop from $3.97 a gallon to $3.39 a gallon in East Tennessee in the past six weeks. I use two tanks a week so it is now saving me $23.20 a week or $1206 40 yearly. The Airlines, Trucking Companies, Cruise ships, Utilities, Railroads, etc. will all save money resulting in lower coasts for their services. A lot of those savings will get passed along to the consumer, resulting in more money left in our pockets.
We think that we have a chance of seeing Oil slipping to $80 a barrel in the next few months. If that happens, the pressure on the consumer will be relieved. For this to happen we will need the Dollar to continue strong against the Euro.
Former chairman Greenspan said last week that the housing market should turn around in the first half of 2009. By then the Banking and Brokerage companies should be working their way out of their problems.
There will be some speed bumps along the way but all in all we are starting to see a lot of light at the end of the tunnel.
For now we are holding our 50% CASH 50% BUY for our conservative accounts.
Till next time
The MTA Staff
