Oil is falling again, off $31 from its July high of $148 a barrel, but some analysts think this is bad news. Paul Kedrosky, a strategist at Ten Asset Management sees oil falling more and settling as low as $90 a barrel and takes his case to Tech Ticker today to explain why this is a negative for the economy.
“Lower oil prices could negatively impact work being done in bio-fuels and solar and wind,” says Kedrosky. “Any price under $100 per barrel is bad for alternative energy market. There is not as much need to explore and invest in alternatives if oil is more affordable for the masses.”
But the people who are hurting most under Kedrosky’s analysis are Wall Street millionaires, and not average Americans. This is where he falls of the beam, but let’s hear him out.
“It will really hurt the venture capitalists, some are highly leveraged in alternative energies,” he adds. “Solar companies would also be hurt by low oil – not a lot of demand for a difficult and not always reliable energy source to use.”
Still, the $4 drop in oil this morning has boosted the stock market, which rose by 200 points in mid-morning trading. I imagine Kedrosky thinks this is a good thing – at least I hope so. Ultimately, I don’t subscribe to the “low oil prices are bad for the economy” pitch that Kedrosky made (I can accept a few VC’s losing some dough over a bad solar energy bet if it means a family of four in Corpus Christi have more money for food and school clothes for the kids).
But you have to give the man credit – it’s an interesting theory, but one that owes more of an allegience to the environmental lobby than to regular folks.
On another front, I ran into a good post on what happens if you take the time to find a good tech stock and stick with it for at least 10 years. On Wall Street, they call that a “buy and hold” strategy but you see less of that mindset in the dynamic, if not fleeting, high tech stock sector.
Tech Gadget points to three tech stocks and estimates what would have happened if you bought them and held them for at least a ten year period before selling. Let’s see what they’ve got.
1. Cisco Systems is a large multinational corporation that designs and sells networking and communications technologies and services. They also own the brands Linksys, Webex, Ironport, and Scientific Atlanta. Cisco was an is an instrumental player in providing the technologies needed to power today's vast international communications networks. They have enjoyed enormous success as the Internet and global communication has ballooned over the past few decades.
-- An initial investment of $100 dollars in 1990 would have resulted in a return of roughly $35,000 if sold at its peak in 2000.
2. International Game Technology is a maker of gaming products and slot machines. They have created many successful innovations in slot machines and other gaming technologies. They are pioneers in video based slot machines and the ticket based slot systems that have supplanted coins in casinos worldwide. IGT was a major player in bringing gaming technologies into the information age. Their innovations in slot machines and money management at casinos has brought them sustained success.
-- An initial investment of $100 dollars in 1990 would have resulted in a return of roughly $33,000 if sold at its peak in 2006.
3. Microsoft is the worlds leader in providing operating systems and computer software to more than 90% of computers worldwide, Microsoft was and will continue to be a powerhouse. Microsoft was instrumental in creating and expanding home computing. Their operating systems and software offerings are ubiquitous around the world and continue to be dominant year after year.
-- An initial investment of $100 dollars in 1984 would have resulted in a return of roughly $25,000 is fold at its peak in 1999.
Granted, who knows when a stock is at its peak? And who knows if a loser shouldn’t be shed after a year or two of losses (although that wasn’t the case for the above stocks)? The point is, if you do your leg work and buy good, well-managed companies with a solid strategy and plenty of room to grow, don’t shoot yourself in the foot by selling them too early.
As Billy Joel once said, it's just a matter of trust.