Wednesday, May 21, 2008
Let me Repeat: Markets Zig and Zag, They Don't Zig and Zig
Oil is on the tip of everyone's tongue. It is the most recent "can't miss" investment. I have been a long term bull on Oil, but as I always said - "market's zig and zag, they don't zig and zig". Also, the rally in oil has had profound effects on other markets, and any correction in oil will have profound effects as well. Figuring out these derivations might do wonders for your portfolio.
There are always unknown and/or unintended consequences to events like this. What might they be? How can you benefit? What is the risk/reward ratio?
Investing is more like chess than anything else I, personally, can think of. You must think several, perhaps many, steps ahead.
I always like to play a game I call: If - Then
If Oil continues up... then perhaps the U.S. equity market heads down further, inflation gains momentum, the U.S. trade deficit worsens, the $ is pressured further, which has effects A, B, and C on commodities 1, 2, and 3.
If Oil corrects...
You got to have a plan, and a plan B.
Mentatt (at) yahoo (d0t) com
Posted by The Short Story Man at 7:15 PM