February 17, 2012, Bob Brinker: Rising Oil Prices, The Economy and Stock Market

February 17, 2012....Many times, Bob Brinker has said on Moneytalk and in Marketimer that rising oil prices are not inflationary because they "act like a tax" and a damper on the economy.  

Moneytalk: Brinker said:  "Oil prices literally going through the roof, and yet to the consternation of many, not listeners to Moneytalk, but to many, including, apparently, the Fed Chairman, they think oil prices are inflationary. That's because they don't understand, they don't understand the taxing effect that these higher gasoline prices have on your pocketbook.

....As we've discussed on the program, the vast majority of people in America today cannot even afford to fill up their gas tank. They can't put the $40, $50, $60, $70 worth into their gas tank because they don't operate on a budget like that. Sure, there are some well-heeled that can do it and not care very much about it, but the vast majority of Americans cannot even afford a $40, $50, $60, $70 fill-up on a regular basis-they just can't afford it." 
 
For several months in 2008, Brinker blamed the stock market troubles and slow economic growth on rising oil prices:
 
August 2008 Marketimer, Bob Brinker wrote:  "In our view, the road to significantly higher stock market prices is linked to oil prices. High oil prices act as a de facto tax on the consumption of gasoline and other energy products. This taxing effect reduces consumer discretionary income, which delays the start of the economic recovery process..... oil prices are the wild card factor in the stock market, in my opinion...."

 

Now here we are in February 2012, and we learn that according to the LA Times,  January gasoline prices are "hovering at record highs boosted by growing economic strength."

Last month turned out to be the most expensive January ever at U.S. gasoline pumps, boosted by growing economic strength. January is typically a month of falling gasoline prices because fuel demand falters in the slower travel weeks that follow the year-end holidays.

And Reuters reports: "Gasoline pushes inflation up in January"

For the Fed, an energy prices spike would represent a quandary: it could hurt the economy even as it boosts inflation. Gasoline prices increased 0.9 percent in January and they have continued to move higher this month. 

"Consumers are going to feel a gasoline pinch in the first half of this year," said Chris Christopher, an economist at IHS Global Insight.

The report also showed so-called core prices, which strip out food and energy costs, rose 0.2 percent, pushing the increase over the last 12 months up to 2.3 percent.

While the year-on-year reading on overall prices has been easing, the steady pick-up in core suggests inflation pressures are not subsiding as quickly as expected, and it could lead to some wariness at the Fed about launching another round of bond purchases to drive borrowing costs lower.

So the stock market rose in January, energy prices rose in January and the economy, according to Bob Brinker,  is going to continue growing.

February 2012 Marketimer, Brinker wrote: "We are estimating 2012 real gross domestic product growth within a range of 1.5% to 2.5% with a midpoint of 2%. If we are correct, the economy will show some modest improvement in 2012 when compared to the 2011 real GDP growth rate of 1.7%. Our 2012 S&P operating earnings forecast remains at $103 which represents an increase of close to five percent over our 2011 estimate. At this juncture, we regard our 2012 earnings estimate as leaning toward the conservative side." 

Brinker has been mostly silent about energy price effects on the stock market and economy since 2008. He has said that he is for the the U.S. becoming more energy independent, and he is in favor of the Keystone Pipeline which the Obama Administration nixed. 

POST AND READ COMMENTS