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Albert Einstein, “Highly developed spirits often encounter resistance from mediocre minds.”

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From uncertainty to recovery

There has been a significant turnaround in crude oil prices since bottoming out in January. Although oil prices are far from $147/bbl as of last July. We have seen prices rebound from $33 to $58/bbl, or by 75%. World stock markets have responded to the oil price increases in a positive manner. In Canada the TSX Composite Index has risen by 3000 points, or over 43% since mid-March. All the gains have been mainly due to regained interest and speculation in the energy sector.

While some energy stocks have risen considerably, others have dropped in value. There are some mid-caps and small-caps that may be on their last gasp. If you are paying attention to the business news you may have realized that all is not well in the oil patch. One such oil company is struggling to do its annual audit and has been suspended from trading. It has used every clever means possible to be reinstated. Active oil rigs have dropped to record lows.

Markets gains have responded to news that most economies have bottomed out and are slowly onto their recovery. Reliable sources in the orient indicate that China, South Korea and Japan have weathered through the economic storm and their economies are beginning to revive. There are signs that in Europe and North America slow economic recovery has begun.

Optimism is beginning to be evident but we are still overshadowed by uncertainty. No-one knows what the outcome will be in the North American auto sector. Both General Motors and Chrysler are going through major restructuring. The outcome is contingent to many factors and difficult to assess. The auto industry in the U.S. and Canada will never be the same as we all remember.

We will continue to see market retreat on occasion due to these uncertainties. Hedge fund managers are still watching the markets and will be dumping stocks that are in limbo. Expect to see this happening very soon. Desired stocks will continue to make modest increases, but there may be some stocks that will take further battering due to sell-offs.

Traditionally the summer months are not kind to the stock markets. Many shrewd investors in the past have exited from the markets and cash out for the summer months. I am certain that this will happen again. Further caution and diligence is a must for these uncertain next few months.

By J. Klemchuk

Copyright ©2008 JeriCan on Oil

May 17, 2009 12:56AM

May 21, 2009 02:13AM
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