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Contributors The Days of Cheap Energy Are Over
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The stock market’s “gravy days” are over. There are many reasons for this. But when we get right down to it, there is one HUGE reason why this is the case.

For a developed, industrialized nation to continue to grow at a fast clip, it needs “cheap energy.”

Prior to 2004, oil tended to range between $15 a barrel and $30 a barrel. Check it out below and you’ll see what I mean.

This “cheap energy” allowed corporations to expand quickly at a relatively low cost. Goods could be shipped by 18-wheeler and it wasn’t terribly expensive.

They could be “jetted” across the country or to the other side of the world pretty inexpensively. Corporations could even ship out products via huge sea-going cargo liners that transported goods all over the world at a fraction of today’s cost.

The Days Of “Cheap Energy” Are Long Gone!

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Oh it was a prosperous time. Corporations grew so fast it was like they were on steroids. Just take a look at the chart of the Dow Jones Industrial Average below and you’ll get a fairly clear indication of just how fast America’s companies were growing…

In 1980, The Dow Was Around the 1,000 Level.

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The Dow doubled about 14 times from 1980 to 2007. Today it’s still about 12 times the 1980 level.

But those “gravy days” are long gone… and here’s why?

Since 2004, oil started its long, steady ascent from the $30s up to the $140s. Even in a world of sluggish, sub-par growth and ultra-high unemployment rates, oil is still hanging in there around $100 a barrel.

So the cost of oil has tripled and even sometimes quadrupled from what it was at as recently as 2004.

Growth in China & India Will Keep Oil at Elevated Levels From Now On

Now here’s the problem. Obviously, oil supplies are tight these days with so many cars hitting the roads in China and India. There isn’t the slack in the world’s oil supplies that there used to be…and that’s not going to get any better going forward.

So that gives the developed world, like the U.S. and Europe, a huge problem. The days of “cheap energy” are gone. In fact, we can tell that the corporate America’s “uncle point” – the point at which it’s time to throw in the towel – is around the $90 to $100 a barrel mark.

These levels can end up stalling the economy. Anything above that simply crushes the economy over time as corporation’s profits get squeezed because the days of “cheap oil” are over. Check out the charts below and you’ll see what I mean. I’ve marked where oil was at each time the stock market has peaked over the last five years.

$90-$100 A Barrel Oil Places A Drag On The Stock Market.

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We know that China and India and other developing nations aren’t going to stop buying cars. We know that Americans aren’t going to own fewer cars.

Corporate Expansion Gets Brutally Expensive From Here On Out…

We also know that for corporations to expand their locations, they’re going to need more 18-wheelers on the road… more jets in the air shipping product and more ships taking their goods around the world.

So I’m sure you can see how the world gets a whole lot more expensive for corporate America when oil gets in the $90-$100 region. Anything above that and its only a matter of time before stocks come crashing down again like they did more recently when oil hit almost $115 a barrel.

Since the days of “cheap oil” are long gone…so are the days of “easy profits” and “easy expansion” for corprate America.

So where does that leave things?

The “Oil Currencies” Will Be The Place To Be.

Oil exporting countries are still going to be shipping out oil all over the world, yet they’re going to be getting a much higher price for it than before. That’s good for the currencies of oil exporting nations like Canada, Mexico and Norway.

Now you may say, but if the U.S. economy slows down, it will hurt oil prices. However, the U.S. and even Europe have already slowed down and that hasn’t hurt oil prices. Why? It’s because the developing world is taking up the slack (and then some) for the slowing down of the developed world.

Therefore the currencies of oil-exporting nations will be the place to be. (In fact, I just like to refer to them as the “oil-currencies”.)

So it’s not all bad news. Yes, stocks will struggle and “range trade” for years. The main growth will come from the dividends that they distribute rather than the appreciation of their shares.

But there’s always something that can benefit from almost any situation out there. These oil-currencies will be the place to be going forward. They will hold up and do great and those that invest in them will too.

However, the person that just plays the “stock market game” will be stuck in a long “range trading” rut that could very well last decades.

Have a nice day,

Sean Hyman
Editor, Currency Cross Trader

P.S. If you haven’t seen it yet, I urge you to read former U.S. Congressman Bob Bauman’s new report. It details why he’s launching a scathing attack on the government… and exposing fraud, abuse and corruption at the highest level. Not only that, he’s also laid out a seven-point Escape Plan for concerned Americans. But don’t hesitate, it goes offline tonight at midnight…  the full memo is here.

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