Thinking About Money

For those readers wondering what I mean by 25 basis points, I am referring to the recent Fed rate increase of 0.25%. Before the Fed raised the interests some were betting that the Fed would increase the rate by 50 basis points. Well the doves have won and the hawks lost, and we have 25 basis points. The result is that the market rallies and we can start to buy stocks, right?

At first when I heard about 50 basis points I was thinking that the stock market will slide all the way to the basement. I thought Bernanke would be willing to tank the economy just like Greenspan did when George Bush senior wanted to be re-elected. Yesterday the Fed did not tank the economy and hinted this probably is the last rate increase for a while.

So now why do I think this is the start of the perfect storm? It all relates back to the price of oil. Oil prices have been increasing, and from the referenced link look at the times when the price of oil falls. Whenever oil falls so does the stock market. A quick analysis would be that oil and the stock market are directly related. Let’s say that they are, which would mean that if the price of oil increases then the stock market will increase and that is good thing right? Increasing oil = increasing stock = growing economy?

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