The stock market closed sharply lower today and it was down a lot for the week as well. If you read many of the articles that "explain" why the market dropped, they will tell you that it is the result of lower oil prices. Normally, the daily explanations of why the market did what it did in that day's trading explain much more than they should. Indeed, it is amazing that all these analysts, who normally have no ability to predict where the market will go when it opens in the morning, know with certainty at the moment of the closing bell why the market went up or down as it did. The truth is that these people don't know anything before the market opens and they know little more when it closes. They are just very good at coming up with "explanations". That is why it makes no sense to attribute the market decline to oil prices falling.
Think about it. Falling oil prices put money into the pockets of most Americans by cutting the price of gasoline. Falling oil prices cut costs for manufacturers, shippers, and all manner of businesses across the country. Falling oil prices makes home heating oil less expensive. Falling oil prices also means that the millions of barrels of oil imported into this country each day cost less, and that leaves more money here in the USA to help the economy. In short, falling oil prices are a major benefit for the American economy and most of the companies across the country. Of course, there are also losers when oil prices fall. First are the oil exploration companies themselves. Their profits are cut as prices fall, and if the fall is steep enough, losses replace profits. Oil service companies also see demand for their work fall as fewer wells get drilled. Nevertheless, the oil industry (although very large) is such a small part of the American economy that its problems are far outweighed by the benefits to the rest of the economy as oil prices fall. So, there is no reason for the stock market as a whole to fall due to declining oil prices.
Why would so many folks tell you that the decline in the market is due to falling oil prices if that is incorrect? Surely, some of this is due to people who just don't understand how the economy works. That group includes a fair number of business reporters. Then there are the people who love to blame any bad economic news on oil companies (who are always evil). There are also those who think that by blaming the oil price for falling stock markets, they can get the price to go back up. These are people who want high oil prices to reduce the use of oil. These people also have no idea how the markets work.
Think about it. Falling oil prices put money into the pockets of most Americans by cutting the price of gasoline. Falling oil prices cut costs for manufacturers, shippers, and all manner of businesses across the country. Falling oil prices makes home heating oil less expensive. Falling oil prices also means that the millions of barrels of oil imported into this country each day cost less, and that leaves more money here in the USA to help the economy. In short, falling oil prices are a major benefit for the American economy and most of the companies across the country. Of course, there are also losers when oil prices fall. First are the oil exploration companies themselves. Their profits are cut as prices fall, and if the fall is steep enough, losses replace profits. Oil service companies also see demand for their work fall as fewer wells get drilled. Nevertheless, the oil industry (although very large) is such a small part of the American economy that its problems are far outweighed by the benefits to the rest of the economy as oil prices fall. So, there is no reason for the stock market as a whole to fall due to declining oil prices.
Why would so many folks tell you that the decline in the market is due to falling oil prices if that is incorrect? Surely, some of this is due to people who just don't understand how the economy works. That group includes a fair number of business reporters. Then there are the people who love to blame any bad economic news on oil companies (who are always evil). There are also those who think that by blaming the oil price for falling stock markets, they can get the price to go back up. These are people who want high oil prices to reduce the use of oil. These people also have no idea how the markets work.
1 comment:
Goldman Sachs. The control of markets! Prices of stocks and indices. Goldman Sachs. The Ultimate manipulator!!!!
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