Below is an article recently published by Elliott Gue. As to be expected, Elliott provides a tremendous amount of insight in a way that is very accessible to all readers. The discussion revolves around the current weakness we’re seeing in the market and what the Fed may do in the latter part of the summer. Since the general direction in the market has a whole lot to do with how your investments perform, I highly recommend you give the article a read.
My Take: Since 1999 the summer/fall periods (May – September) of the year have all seen a correction in the S&P 500 index, except in 2008. With that said and the past week of market turmoil that was just experienced, I am linking to a well presented and thought out piece that should be food for thought. This also supports my recommendation to establish a short position in the S&P 500 as a hedge.
The average summertime correction in years when the market generally rallies is 11 percent and the average duration of the downturn is just under 3 months. Unless the economic data deteriorates further, I’m looking for a pullback of roughly average duration and severity this summer. Such a move would see the S&P 500 re-test the 1,270 to 1,280 support area and find a bottom at some point over the summer…READ MORE.
In 2010 the world consumed about 88.2 million barrels of oil per day–2.7 million barrels per day more than in 2009. Whether you look at the incremental increase in demand or the percentage gain, oil demand in 2010 increased at the second-fastest pace in 30 years. Much of this rebound stemmed from the snap-back in consumption that followed the severe 2008-09 recession. But the magnitude of this recovery took many analysts and industry participants by surprise.
Investors should also remember that although US oil demand remains well under its 2004-05 high, global oil demand hit a new peak in 2010. Demand growth in 2011 won’t match up with last year’s resurgence. However, the International Energy Agency’s (IEA) forecast still calls for global oil demand to grow by more than 1 million barrels per day to 89.3 million barrels per day. This uptick in consumption hardly qualifies as weak; oil demand has grown at an average annual rate of 1.05 million barrels per day since 1990.
The IEA has raised its estimate of 2011 crude oil demand sharply higher since July 2010. Although the agency has trimmed its projection by about 300,000 barrels per day since August, these estimates remain far higher than they were six months ago…READ MORE.
My Take: The piece linked above provides a great overview of projected oil demand with some industry insights in terms of how investments are likely to react given a run-up in price of a barrel of oil. Elliott Gue is an expert in energy related investments and does a great job explaining some of the industry’s mechanics (investing related) in a way that is accessible to a wide audience.
Gasoline accounts for a little over half of every barrel of oil that the US consumes. But despite gasoline’s importance to the oil market–and US consumers’ wallets–rapid growth in consumption of distillate fuel has driven US oil demand over the past few months…READ MORE
Elliott Gue is a guru when it comes to the energy markets. He’s one of my favorite sources to turn to when I’m trying to understand emerging trends in all things related to energy. In the piece he’s written (linked above) he does a great job briefly discussing the impact diesel fuel is having on driving the price of oil higher. As we know, it’s gas gas and more gas that gets the focus when we’re talking about rising or falling oil prices. I highly recommend him and his article.