The market has rejoiced at the “collapse” of oil prices to $120 a barrel. This enthusiasm is misplaced. $120 oil is still astonishingly expensive.
$120 oil may mute some of the damage that a sustained $150 oil price may have inflicted, but $120 oil will still choke the economy. Even if oil fell to $70 tomorrow, moreover, the economy won’t turn on a dime–especially with the housing and debt markets still cratering. If oil stays where it is, meanwhile, or drops to $100, the demand will still likely be curtailed.
And besides, the reason oil is falling is negative: global economic collapse generally isn’t good for stocks. At some point, the market will likely wake up and realise this.
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