Oil, Stock, and Housing Declines

Ironically, oil is now down more than the stock market and even home prices!  From their peaks, oil is down 27.18%, the S&P 500 is down 22.16%, and the S&P/Case-Shiller 10-City Median Home Price index is down 20.46%.

click to enlarge

Comments

[cocomurph:]

The last time I looked, neither housing or the S&P essentially doubled in less than a year.....unlike oil.

So what's the big surprise here? From a MUCH greater speculative peak, comes a bigger decline in a shorter period of time.

More "insight" from Bespoke? Duh!

2008 Sep 07 09:24 AM

[John Lounsbury:]

If there is major deflation in several major assets simultaneously (I would include all industrial commodities with oil), how can inflation be a problem? My answer: Either (1) the downturns being discussed are merely market corrections with upward valuations to resume shortly or (2) we have entered cyclic trends that will continue for many quarters (or even years).

If option (1), inflation is a problem. If option (2), inflation will abate (best scenario), or deflation of world economies will occur (worst scenario), or something in between.

I don't think many are considering option (2) possible. Therefore, as a contrarian, I keep it on my radar.

2008 Sep 07 11:31 AM

[Tom Lindmark:]

I hope these guys didn't blow off their entire Saturday researching this insightful article.

2008 Sep 07 01:17 PM

[mixter:]

I am keeping my oil stocks! We'll see how they have performed two years from now.

2008 Sep 07 02:05 PM

[egoist:]

mixter, you are right but it looks now that we can easily see 85$/b so why not to open long position when oil price will fall further. Waiting support from OPEC? Didnt you get they already lost any control under oil price. Its all about great speculation and speculators. Wish to have a profit from here? Make your best to understand speculators think and agenda. Forget OPEC, forget hurricanes.

2008 Sep 07 05:18 PM

[Marc Courtenay:]

Bespoke's contributions are helpful, brief and always relevant. My compliments to them for their choices. The first comment forgot that home prices in some areas of the country quadrupled between 1997 and 2005, so they probably have quite a ways further to fall. Keep an eye on Hurricane Ike...if it doesn't weaken much and heads into the Gulf of Mexico oil might just spike again for awhile.

2008 Sep 07 05:38 PM

[Steven Hansen:]

i love data sets and bespoke throws them out. you don't keep your eyes focused on one point so it is helpful when you are reminded of what the current situation is.

2008 Sep 08 12:09 AM

[insideoil:]

Seems people have forgotten when oil was 10-12$/bbl - it was not THAT long ago.
Fundamentals now support $80/bbl (based on marginal new production costs) - even with declining demand, and new increased Saudi production on line in the last few months. My simple view is that the OPEC members also keep their eye on return of capital, rather than just return on capital - so we will see production line out to demand by just cutting back to quota levels after the Sep 9 meeting. The loudest OPEC members in favour of production cuts will be those without investment portfolios - they need the cash to run their countries, and they are seriously struggling with $ induced import inflation.
The worst that can happen if the USA does not get its house in order is a bail out from the US$ by OPEC members, in favour of a currency basket for these oil producers.
My simple view is that the dominant OPEC decision will be taken one by one based on return of capital i.e a fear based defensive action looking at investment portfolios, rather than pure income only. We will see a dip to the $80/bbl level short term, but as soon as as any strength in demand returns, prices will jack up again as greed returns. That strength in demand can come from East or West, or from hurricanes or politics - it matters not from which cause, only when, as supply does not exceed demand by any comfortable margin.
The lower the price falls and the more jawboning on green alternatives, nuclear, drilling USA or whatever, the more real oil/product projects will be slowed - leading us closer to that supply/demand balance problem again.
I'm betting the energy sector will fall just as everything does during this downturn, but its pick up on the next cycle upwards will be faster and even more furious than the last rise from $10/bbl to $140/bbl.
Aaahh - but the only problem is the timing !!!

2008 Sep 08 12:54 AM

[mangolfer:]

Should of added tech stock bubble and housing stock bubble. Oil has a ways to go yet.

2008 Sep 08 08:05 AM

[Danny/The D...:]

According to BusinessWeek (9/15 issue), Noble's diversified fleet of 62 deepwater and shallow drilling rigs ... are running flat out!

Now, why do you think that is ... IF oil is not as valuable today as it was at its July peak? Do you really think it is speculators that are "driving" the true value of oil?

Or, do you think it might have something to do with the rise in the value of the U.S. dollar? And what justifies the increase in the value of the dollar? Currency speculators????

My advice is that energy investors should keep their energy holdings, be patient, and enjoy future increases in the value of that sector.

2008 Sep 08 11:14 AM