Sunday, April 30, 2006

Oil Prices

I'm getting increasingly sceptical of macro economic forecasts made by
leading economic insttitutions and economic journals. Six months ago
when oil prices crossed the comfort zone, all analysts had said that
if oil remains at these levels the world economy will go into
recession. Well six months are over and oil prices have continued
their northward run but the global economic health seems as good as ever.

This not only raises doubts on capabilities to make such predictions
but also coroborates views of Buffett regarding giving low priority to
macro economic factors. He says "When investing, we view ourselves as
business analysts - not as market analysts, not as macroeconomic
analysts, and not even as security analysts. "

These variables are very difficult to predict and investors are better
of by ignoring them unless they themselves are very sure of the their

Having said that I'm not concluding that the high oil prices will have
no impact but we have to take the predictions of the extent of impact
and time with a pinch of salt.

Posted:Apr 5, 2005

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