--“For us, energy is what coal and steel used to be,” says German Chancellor Angela Merkel. What does that mean? Energy is strength? Energy is power? Energy is that without which economic growth and national security are not possible? Or energy is something we don’t want to have to depend on other, perhaps unfriendly nations for?
--You puzzle that one out with us dear reader. And while you’re thinking on it, here’s a way to put the events of early 2007 in perspective: a great baton passing. First there is the fake baton passing in the American stock market. Nasdaq tech stocks would like you to believe they have overtaken sluggish oil and copper and coal and gold in the footrace for future returns and investor capital.
--Don’t forget 2000 though. Tech stocks are notoriously fast starters and spectacular non-finishers, or worse, flame-outs. Some of them never finish the race at all, self-immolating in a heap of smoldering paper at the side of the capital track.
--Oil, copper, and gold, on the other hand, never get the respect they deserve. Sure, they are slow, stodgy, solid, and predictable. But their pace hardly ever flags. It is methodical, consistent, and reliable. This ruthless pace also tracks the dollar the way greyhounds track a fake rabbit at the dog-track, except in this case, the faster the dollar accelerates to the downside, the more rapidly commodities increase to the upside.
--For now, though, commodities are content to run their own race while the dollar does what it’s must. And that strategy looks just find to us. In fact, according to a chart we posted below it looks to us like the oil market is right where it should be as a long-term bull market.
--Bull markets tend to pace themselves like a good distance runner and not a sprinter. You can view corrections as the slow flushing of lactic acid from the muscles. Backing-off a bit after going up nearly eight times is not unusual for an asset class, it’s normal. So if you think Intel (INTC), Apple (AAPL) and Microsoft (MSFT) are really the new market leaders, be our guest and buy them. But we’d keep our eyes on XOM, COP, and CVX.
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About the Author
Dan Denning is the author of 2005's best-selling The Bull Hunter (John Wiley & Sons). He began his financial publishing career in 1997 and has covered financial markets form Baltimore, Paris, London and, beginning in 2005 Melbourne. He’s the editor of The Daily Reckoning Australia and the Publisher of Port Phillip Publishing.
