Welcome to
"StockBreakthroughs Newsletter"
March 26, 2005.
In this issue...
Oil Prices.
Oil prices have been skyrocketing in the last 6 months reaching a record high of up to $57.20 during the trading session on March 18, and the markets reacted very nervous.
But is it really necessary to panic about some oil prices?
If you look at it carefully, on short-term, it does have an effect on stock prices. But only on short-term, because investors always had and still have the tendency to react either euphoric or in panic when something happens that surprises them, or that catches them off-guard.
But lets take a look what happened in the past and how oil prices developed:
In the past, the markets had to swallow several bitter "oil" pills. Since 1970 we've had 4 "price-shocks"
1) The oil crises in the 70's where prices shot up to $9 from $3.
2) The war between Iran and Iraq in the 80's where oil prices went from $12 to $30.
3) The first Gulf-War in 1991 that doubled oil prices from $18 to $36.
4) And in the last 2 years oil prices went up from $30 to over $57.
Now every time oil prices have made a sharp turn up, the stock markets went for a rather strong slide. But what can also be observed is (and investors tend to forget this) that the markets have always recovered from strong and high oil prices. There's a reason why the Dow Jones is above 10.000 points which was definitely not the case in the 70's!
During the oil crises, where stocks started falling on November11. 1973, the Dow was up 1051.70 points. When the crash ended on June12. 1974, the Dow was down to 577.60 points. And now we are seeing markets that trade on a much higher level. So what's there to worry about?
The fear of investors about higher oil prices is very exaggerated and in the long-run we're going to have to get used to higher oil prices anyway.
Even oil prices of $70 or $80 are definitely possible. Probably not this year, but what about in 5 or 10 years time. As we all know, the world is slowly but surely running out of oil. Supplies are suppose to only last another 50 years or so.
How high are oil prices going to be then?
Oil prices have been going up ever since this black and viscid stuff was found. The world survived a big oil crisis in the early 70’s and other similar "oily" events. And look where the market is today! Look where company’s like McDonalds, Microsoft, Pfizer etc. stand today! Way higher than in the past although oil costs much more today than it did many years and decades ago.
So why worry?
Yours in Successful Trading,
Ricky Schmidt
Information, charts or examples contained in this lesson are for illustrational and educational purposes only. They should not be considered as advice or a recommendation to buy or sell any security or financial instrument. We do not and cannot offer investment advice. For further information please read our disclaimer at: