Many folks are sceptical of the rally. Yet the market goes up and up and up. And yes we hear yet again this “light” volume argument. And of course we hear arguments that the world is going to collapse from the likes of Jim Rogers and Marc Faber. Though the Marc Faber one puzzles me because on April 8 he was bullish. When I see such flips I become very sceptical of the person unless they have some real reasons of flipping their opinion.
Anyways, will we have a pullback? Maybe, maybe not! I am still bullish because of commodity prices and the effect it is already having.
My sister and brother live in Ecuador and Russia respectively. Both are for me barometers of where things are going. My sister has this odd habit of wanting to leave Ecuador whenever things go bad, and oddly enough it coincides with the prices of commodities. About 5 months ago she wanted to leave Ecuador again and head over to Canada. Now my sister is content and they are thinking of moving into another neighbourhood. In fact she tells me housing by them (near Quito) is actually starting to pick up for the lower to middle class. This is good because it means Ecuadorians are becoming consumers.
Thus I am rather bullish since I think the higher commodity prices are starting to kick into the economies of Ecuador and Russia.
Will that improve things in the Western World? Not a chance! At least not immediately. With Obama’s new fuel efficiency policy this higher price of commodities will make the higher prices more digestible, and hence more productive on the whole. But eventually it will lead to more exports and more demand.
So while yes oil is going up for no reason remember that markets try to look forward. And what I read into higher prices is the resulting higher demand that results from companies getting more money for their raw materials and products.
That’s why I do believe that the global economy has restarted and is slowly getting into forward gear. Will it be fast? Absolutely not since the entire global economy is restarting. But I do think we might have seen the bottoms in March.
From this point on I do see the stocks of global corporations being higher than ever in about 5 to 10 years. Local players I am very bearish on because there are issues in the individual local markets of the Western world.