Wednesday, December 24, 2014

Stock Market: Merry Christmas

(Drivebycuriosity) - Christmas is the season for reflection but also for giving gifts. Investors received this year ample presents. Yesterday the U.S. stock market closed on an all-time high. The S&P 500, a gauge for the U.S stock market, climbed 13% year-to-date and the Dow Jones crossed the mark of 18,000 the first time of his history. The rally is a response to an economy which is getting stronger. The stock market also signals growing optimism for the year 2015.

The greatest gift for economy and investors are falling commodity prices. The price of oil dropped more than 40% since summer. I think this is a late response to an oil glut which has been accumulating over the recent years. Continuous speculation on a supply disruption caused by geopolitical conflicts has been keeping the oil prices way above the fundamentals. Technological progress that reduced demand (fuel efficiency) and raised supply (tracking, horizontal drilling) was ignored. Now the mother of all bubbles is popping. I think the oil price has to go down deeper and could fall to $40 or below in 2015.

Cheaper energy reduces cost for companies, especially in the transport sector, and consumers have more money in their wallets.

"The best aspect of Christmas is the aspect usually decried by the mystics: the fact that Christmas has been commercialized. The gift-buying . . . stimulates an enormous outpouring of ingenuity in the creation of products devoted to a single purpose: to give men pleasure. And the street decorations put up by department stores and other institutions—the Christmas trees, the winking lights, the glittering colors—provide the city with a spectacular display, which only “commercial greed” could afford to give us. One would have to be terribly depressed to resist the wonderful gaiety of that spectacle". From the Ayn Rand Lexicon (aynrand)

Merry Christmas to everyone.

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