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  • Pain at the pump is here to stay and there's nothing you can do about it  [Edit or Delete]0 comments
    May 12, 2011 12:53 PM | about stocks: UGA
    The thoery of dyseconomics says that all asset classes are correlated with confidence and economic growth. The propect of strong economic growth and perpetually low rates makes inelastic things surge (gas, food, energy) and this helps the economy by forcing consumers to spend- a perverse positive feedback loop.

    According to blomberg:

    http://www.bloomberg.com/news/2011-05-12/retail-sales-in-u-s-rise-0-5-reflecting-gains-in-fuel-food.html


    “Spending improved at service stations and grocery stores and dropped at furniture and electronics dealers, showing mounting bills for food and gasoline are leaving Americans with less money for other goods. At the same time, sales at chains likeMacy’s Inc. (M) topped analysts’ estimates, a sign the improving job market will prevent consumer spending from faltering.

    So there you have it..
    Surging living expenses is not hurting the economy as so many wrongly predicted would happen. Money that is being spent for furniture is being used to fill up the tank, but it still contributes to the GDP. It doesn't matter what people buy- spending is spending.

    The only way pain at the pump will be defeated is if BRIC economies falter (fat chance), Bernanke raises rates unexpectedly (even less likely), financial crisis relapse (don't bet on it) and a bear market (almost impossible unless either of the prior events happen) so expect more of the constant whining about pain at the pump, $5/gallon gas by late 2011, and pointing fingers at oil companies. 

    Actionable Trade: buy UGA (gasoline etf)
    Stocks: UGA
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