The Dow is down about 150 today and the NASDAQ 45. I wonder if any American executives will commit Hari Kari like the LiveDoor guy?
I used to own and operate a small business that depended heavily on continuously running heavy duty trucks around the greater Houston area. During the year 2001, after the Y2K threat was a bust along with the entire tech market, fuel prices had been high for some time and the Dow had been fluctuating around 10,500. I said then and have been saying since then that the Dow would never budge from the 10,500 median until the price of gasoline comes back down to an affordable price. Little did I know how right I was. Five years and counting and I am still right.
9/11 knocked the Dow in the dirt but it recovered. That the stock market recovered from 9/11 but not from the high fuel prices should put in to perspective how important inexpensive fuel is to the economy.
A buck twenty–buck fifty max–is the price point under which the stock market will resume its inexorable growth to 100,000. The reason the market wont grow otherwise is that our economy, like no other in the world, is dependant on gasoline. This is especially true for the small business economy, which everyone knows makes up the bulk of the economic activity in America.
When the Dow recently went over 11,000 for the first time since June 2001, I was worried that my corollary was about to be shattered. Today, I stand on my prediction. As long as fuel is above a buck fifty–and certainly while it is above two bucks–the Dow will remain around 10,500, give or take five hundred.
In lieu of fuel prices receding, the only thing that can kick off a significant surge in the stock market is another technology bubble that everyone will scramble to get in on. Irrational exuberance I think it is called.
UPDATE: Dow down 174, NASDAQ down 50, due to spike in oil. Google down 8%
FINAL: Dow down 210, NASDAQ down 54, oil settles over $68, Google down 10%
Dayum!
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