Must we always look at oil price?

The market is ridiculously sensitive to oil price.

2 days ago, Dow Jones rallied because of oil price dropped. Yesterday, oil price shot up to record intraday high of USD140 and the Dow Jones plunged close to 360 points. When US catches a cold, the rest of the world gets fever. Singapore market is no exception. As at 10am, STI dropped 51 points. The market is trading based on emotions and mood swings, but then again, this mood swing is consistent and relative ‘predictable’ should we leverage on this mood swing and how? Suzanne Jung, the TV reporter of Channel News Asia, recapped (with exclamation, so cute) that a few months ago, analysts predicted that the oil price will shoot up to USD200 at the end of year. Jennifer, another business report explained that it is probably due to speculations. It was quite fun looking at two young chicks reporters discussing oil prices 7am in the morning. My personal view is this: what goes up will eventually come down. Today’s oil price’s surge is not only due to high demand and lack of supply, but also weakened USD. Although USD is and will be depreciating in the long run, oil price surge due to weakened USD will not sustain and will be adjusted accordingly. Lack of oil sources is a true problem and it is well known in the sense that it is not something people caught off-guard, middle east has already increased oil supplies and alternative energy sources are being explored. Recent oil price hike is more due to traders’ speculations. I definitely do not agree with the so-called analysts (who could be speculators themselves) that oil price will hit USD200 end of year.

ET just SMSed me while I was writing. He has been very bearish and hoping Dow Jones will plunge further and apparently he is happy with yesterday’s closing. However, this plunge is illogical, it’s not due to healthy adjustments on the fundamentals but rather based on short-term speculative movements on oil prices, the buying opportunities are short-term and they come and go. ET claimed that he is a fan of Buffet and does not time the market, then how on earth of all these value investors take advantage without looking at the market at all?