Much Ado About Oil

 | Dec 14, 2011 | 2:31 PM EST  | Comments
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If the oil stocks were only right. If oil would only go down as much as the oil stocks are showing crude will, then you are going to catch a tailwind at a certain point that can help the consumer.

Here's the issue, though. There's real demand for oil from the emerging nations, so this decline is just wiping out the hedge funds that have held up oil along with the rest of the commodities.

You know that I think that oil's been manipulated upward for ages. But I also think that there are geopolitical tensions and Chinese demand issues that make it so oil won't collapse, even as you hear many people say it will.

Commodities are tricky things to read ever since they became an asset class. Just like everything else that can be traded, it can be manipulated and it can be raided down and up. A commodity mini-crash like we are having today can signal:

1. Worldwide recession à la 2008.

2. Hedge funds making a huge bet against Europe.

3. People who believe that when the euro is weak against the dollar they can go long the dollar and sell commodities.

I tend to look at these things as all of a piece. If the world were doing well, we wouldn't be having this selloff. If the oil stocks are right, then we are going to get tremendous buys, though, in all of the food and soap group stocks that use a tremendous amount of energy.

Too soon to tell because it wasn't that long ago that we would have been knocked for a loop if oil went to $95.

I do, however, want to keep the silver lining in front of you.

Random musings: How about these oil stocks? If they have yield, you can be in them. If they don't, let them come in and then pick. Not today, though. We will get some analysts who panic out tomorrow and downgrade the stocks and their outlooks for crude.

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