Ben Stein on Oil

Ben Stein lays out strong thoughts on the responsibility for high oil prices here (PDF). An excerpt:

“The energy companies — by and large and with some exceptions — just go out into the market, like you and me shopping at the grocery store, and buy oil, process it, and then sell it with a small markup to pay them for their efforts and to reward their stockholders for risk. This profit is pennies compared with what stock brokerages, software makers, and other major U.S. companies earn on a percentage basis of sales. In other words, the oil companies are just messengers announcing to energy-consuming Americans the news about oil prices.”

I agree 100%. Later he adds:

“As for me, I question if the commodities boom can go on forever. I have some of the funds I just mentioned, but not a lot. Commodities booms come and go — historically, they’ve never gone on forever. If you think this one will, here’s a hint. When people say, “Hey, this nonstop boom has never happened before,” and someone responds, “This time it’s different,” hold onto your wallets. “This time it’s different” is one of the most frightening phrases in economics. It’s entirely possible that the next move for oil is a long step down. Then won’t we be sorry for shooting the messengers?”

I agree here too. The idea, the trend following mantra, is not to predict bull or bear markets, but rather to follow along the market direction with a precise plan for exit always in mind.

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