20080804 Timer Commentary

The price for a barrel of oil dropped almost $3 today, down about $26 from the high less than a month ago. If you had been asked what would happen to the stock market if oil prices fell 18%, what would you have said? People assume that the driver for falling prices would be supply, but with the economy cooling, lack of demand is controlling the direction. The drop in oil prices will certainly not hurt the market, but it will remove another distraction from masking the fundamental problems.

Jobless claims were up, GDP came in below consensus (with downward revisions to previous quarters) and inflation "surged." Ah, inflation is in the air like a monsoon pumping moisture into an already unbearably sticky August day. The Fed is likely to remain immobile - sweating profusely, complaining about the heat, but unwilling to turn on the interest rate fan because the economy has the chills.

Current model positions: two models short, two models cash.