by Gabriel Andre on August 7, 2008
Oil is trading just below US$119. That’s almost a 20% decrease since its high.
If you’re following the oil price closely, you’ll know that the market is one-eyed at the moment. It has picked oil demand as the indicator to rise and fall on.
We know this…because traders are ignoring most other things. Neither a tropical storm in Texas nor looting attacks in Nigeria triggered spikes on crude oil prices. They’re both key oil precincts.
And the same day that Iran tested a new missile in the Persian Gulf, a barrel of the slick stuff dropped below US$120.
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by Allan Robinson on July 24, 2008
Correlation isn’t the same thing as causation. Our year nine maths teacher taught us that.
“Every single person,” he said, illustrating his point, “who drinks milk…dies. There’s a perfect correlation between drinking milk and kicking the bucket.”
A couple of inattentive students looked worried. What our maths teacher meant, of course, was that milk isn’t a significant cause of bucket-kicking. Unless you happen to be a particularly uncooperative cow.
But whether you’re bovine or human, here’s a correlation that should have a bit of meaning for you. There’s some causation here. It’s the Australian version of that ‘Oil vs. Shares’ graph you saw here yesterday.
Yesterday we looked at the Dow Jones version. The All Ordinaries has fallen in much the same way as oil has risen. But since oil corrected, the bounce in shares hasn’t taken off yet.
There are a couple of reasons that might be the case. The oil price might not be the cause of share price movements. Or a bounce in shares might be ahead.
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