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Tuesday, July 22, 2008

Bob Brinker Throws Charlie Maxwell Under the Bus

Is Brinker admitting he can't predict the future price of the stock market because he can't predict the future price of oil? On Saturday July 12, Bob Brinker commented on oil prices:
Here we see oil having closed the week at an all-time-record-high, close to $145 for a barrel of oil………..And there is an inverse relationship that has developed between upward spikes in oil prices and the stock market, and that inverse relationship has really been showing up now for some time.

"The stock market wants to see an economic recovery scenario. It does not want to see an increased oil price scenario, which is was it’s seeing right now. Now I wish I could tell you what the price of oil is going to be in a week, a month, a year. I don’t know. I have no way of knowing and I think only a fool would try to forecast the price of a barrel of oil in the world we live in…….”
Is Bob Brinker calling himself and his guest Charlie Mawell fools for trying to predict the price of oil less than a year ago?

David Korn Moneytalk Commentary: (November 10-11, 2007):
Charlie Maxwell, the oil energy expert, was on Moneytalk in September and predicted that oil should stay in a range of $50s up to $80 a barrel for another two years. Bob took up this mantra in response to a caller some weeks back saying he was going to go with Charlie's prediction. Up until recently, Charlie had been pretty on the mark as oil had only gone to the upper $70s. With oil now knocking on $100 a barrel, the prediction Charlie last made is pretty much out the window.
David Korn Moneytalk Commentary (May 19-20, 2007):
Maxwell/Brinker: Bob opened the interview praising Charlie for his predictions on Moneytalk that the price of oil would trade in the $50s to the $70s which has been right on the mark in recent years. Bob asked Charlie if he had changed his forecast. Charlie said we have seen oil go from $25 a barrel in early 2003, to as high as $75 a barrel, with a peak at $78. There was a lot of oil being traded at $75. The rise from $25 to $75 is huge and represents a 200% increase. Nevertheless, Charlie said he thinks supply and demand are roughly in balance today and might stay here for a while, particularly given the weakness that is going on in the U.S. economy. A slower U.S. economy can translate into reduced imports, and thus slow foreign demand from countries like China. This period of transition where we stay in the range of $50s up to $80 a barrel should stay with us for another two years.
  • Kirk Comment: Just today the CFTC task force study concluded supply and demand are main factors in oil price run up to record levels
With this as a backdrop, Charlie thinks that by 2010-2011, we could see oil trade at over a $100 a barrel.

David Korn: Charlie has actually gone on record in the past projecting that West Texas Intermediate Crude ($WTIC) would rise to rise to $85 by 2010, $180 by 2015 and $300 by 2020. Based on today's interview, it looks like he raised his 2010 prediction by $15 a barrel.I don't think Charlie Maxwell and Bob Brinker are fools. They were just very, very wrong.
James Rogers (Mr. Bow Tie as Bob Brinker used to call him) and many others predicted commodity prices would soar for many reasons including "easy money made available by the Federal Reserve."

For years Bob Brinker has been in favor of a low Fed Funds rate as he has dismissed the effects on inflation these low rates have. Brinker was wrong while others like me who warned about inflation from higher priced oil (and other rising commodities) were correct.

The above chart shows the S&P500 is back to where it started 2006 while the price of oil has more than doubled. The chart also shows the S&P500 made a record high even as the price of oil soared 50% from $60 to $90.

Bob Brinker needs to look at the credit crisis for what caused the stock market to have a bear market. Here is the same chart with the Financial Sector exchange traded fund, XLF, added.

This chart of oil prices, the S&P500 and XLF since June 1st shows just how wrong Brinker is about what is driving stock prices. Hint... it is not oil!

I think Bob Brinker has thrown Charlie Maxwell under the bus so he can blame someone for missing a bear market over the price of oil. The trouble is, the collapse of the financial sector is driving the price of the stock market, not oil! Oil is where it was in early June while the S&P500 is down considerably. Brinker should admit he was wrong and stop trying to find scapegoats.

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