The stock market and the oil market both seem to engender feelings much like summer vacation time when I was a kid. Kinda boring, not much happening, a time to wander around, allow your attention dwell on whatever news of the day happens to come along and rest your mind before getting back to the "real world" some time around Labor Day. So we can be distracted by Gov. Sanford’s bazaar behavior, the political drama of health care reform, Berlesconi and his babes, or Wimbledon - all of which are equally unlikely to have any real economic importance.
One comment on a current event related to oil: I feel so sorry for the reform politicians and demonstrators in Iran who are not likely to change anything in the short term and in many cases will pay a very high personal price for trying. Obviously, many already have; 20 are reported dead so far. The seeds of Middle Eastern democratic reform sprouting in Iraq, Lebanon, and now Iran are like putting small deposits into a savings account. If you keep adding to the account over time and it keeps accruing interest, it could amount to something significant some day. But in the short term there will be no change I think and the oil market seems to agree as it basically ignores the news from Iran.
The irony of Iran’s "revolution" is that the primary short term impact may be to bolster Iran’s effort to get a nuclear bomb. If the West perceives that a real possibility of regime change exists, as it wants to perceive, there are two implications. First, that perception will inhibit Obama’s efforts to negotiate with Ahmadinejad because doing so would seem to "legitimize" him and thus put a stick in the eye of the reformers. Second, it will be hard for the U.S. to support an Israeli military attack on Iran’s nuclear facilities if A. we haven’t had a chance to try negotiations, and B. such an attack would be seen as uniting all Iranians against the West and thus undermining the potential for a popular uprising of "reformers." So if both negotiations and a military "solution" are delayed, the main impact of the popular uprising may well be to give Iran a lot more time for building their bomb.
Investing
The U.S. economy, as reflected in statistics and most anecdotes, seems to be limping toward stability with consumers coming back into the market a bit when tempted by something really interesting like a great new I-phone or a super-cheap California house, but most consumers are still saving as much as they can. Investors, meanwhile, seem to be holding their breath while waiting for the next big injury to the economy to manifest itself. That will come in the form of commercial loans going bad, particularly real estate loans. Investors hope to see some signs that an actual recovery has begun. But so far real estate prices are still falling: end of story. No bottom in real estate, no recovery.
Despite the bleak statistical picture, I was reminded of how robust the actual existing economy still is, despite the recession, when I went out to CitiField to see the Mets play the Cardinals, my first trip to a baseball park in decades. My busy lawyer son treated Nina and me but the main treat, of course, was getting a chance to spend the evening with him. We had a nice time at the game; the weather was OK; and baseball parks are always beautiful. But I must say this new stadium seemed a bit cheesy in terms of its off-field amenities and aesthetics. I hear the new Yankee stadium has a lot more class. We’re hoping to make the comparison based on personal experience soon.
