I have received several questions on the impact of oil price spikes (both personally, via invest-safely.com, and comments on this blog).
I do have an opinion, which is based on my limited knowledge of the facts. I am no expert on the oil industry, let alone how the impact of price is absorbed through corporate value chains and investor perceptions. As I say on my website: We cannot predict. We can only prepare.
I came across some historical data over at the Big Picture that you may want to consider. Since we’re always talking about a process or rule-based decision making, this is the type of analysis that you should consider when making decisions or developing a process.
Mr. Ritholtz posts some interesting findings from David Rosenberg of Gluskin Sheff about the spot price of oil:
“There have been only five times in the past 70 years when this [ed. – spot price of oil doubling in a 2 year timeframe] has happened within a two-year time frame: January 1974, November 1979, September 1990, June 2000, and August 2005. And now, December 2010…all but one involved a recession for the U.S. economy (ed. emphasis added)
Combined with an extended rally which is encountering selling pressure, now is definitely the time to dust of those sell rules!
What Does Oil Doubling in 2 Years Mean?
B. Ritholtz – The Big Pitcure