Piano Overhead

We have been constructive on the US consumer for some time; most others have now come to join us.

But maybe at the wrong time.

Oil is at 5 month high, the WTI benchmark up 3.2% today alone to $102.59.

Recall the spike, March and April of this year.  Economists’ models didn’t flash red until too late. Not being similarly handicapped because we never use models, we predicted ahead of this crowd that the spike (as translated to gasoline prices) would slow consumption substantially.  This was the result.

Now, the same bunch, caught flat footed earlier, are reluctant to get rolled again. This time they may luck out.

Nigerian cutbacks and bloated demand from emerging credits (China, India, L America) are frequently sited culprits. Speculators are another. So is potential conflict, Middle East. In fact, our view is that this is the primary culprit. It’s easy to say it’s mere saber rattling over there. Odds are very good that it is something more.

WTI at $102 + does not impact gasoline immediately as it would in the summer. But if prices hold, then move higher - which we have as the course of least resistance - then we’ll all have to sober up.


Robert Craven