How much will the high price of oil impact an
already weakened US economy and currency? As the Leeb Income Performance Letter
reported today, "We're now well above the sort of price increases which
typically lead to economic contractions."
"Moreover, even the oil producers--the very
companies that will benefit from higher prices--are starting to struggle. If we
see these shares start to sell off even as oil prices advance further it would
be a proverbial fallen canary in coal mine signaling trouble ahead for the
overall economy and stock market."
We are are not pessimists, dear reader, just
realists. We are loathe to call a politician's ear a silk purse. As Dr. Leeb's
folks so clearly framed it all, "What
passes for an energy policy in this country is a joke. Last week
President Bush went hat in hand to the Saudis to plead for more oil. In
response, the Saudis offered nothing more than a token gesture--which will have
absolutely no impact on the price of a barrel of crude".
For its part, Congress has yet to push for conservation
measures or the serious development of alternative energy sources. Our
legislative branch's biggest accomplishment has been to put a halt to
stockpiling the Strategic Petroleum Reserve (SPR). But stopping the trickle of
oil flowing into the SPR will not bring down prices.
Congressional leaders are also threatening to sue OPEC
for not selling us all of the oil we want. With Congress stocked mostly with
lawyers you would think they'd understand that they don't have a leg to stand on
when it comes to forcing OPEC's hand. Are these lawyers playing with a full
deck?
There's something else I don't hear much lately:
That the financial crisis, born of the creation of so much worthless paper, is
going to get worse. And if you won't take it from me, take it from the Oracle of
Omaha, The Billionaire Next Door, Warren Buffett, who spoke up yesterday at a
press conference in Spain. Anyone brave enough to bet he is exaggerating?
According to the International Herald Tribune
Buffett said Wednesday he sees more opportunities for big acquisitions in Europe
than elsewhere. Buffett, one of the world's richest people, was in Spain on the
third leg of a tour of Europe to explore such prospects.
