February 22, 2011
The tidal wave of unrest that started in Tunisia in mid-December has by now swept across the middle east, washing away the ossified and oppressive regimes in that country and in Egypt, and shaking the foundations of similar governments across the region. Libya is teetering on the edge, with the 40-year rule of the eccentric Muammar Gaddafi looking endangered.
The effect of the protests and the instability they may bring to financial markets is today illustrated by oil prices: higher in recent days. And with higher oil prices some international stock markets have dropped. Cause for alarm? I don't think so. Gaddafi will stay or go. The Gulf States like Bahrain will liberalize or they won't. Despite short-term price moves, oil will keep flowing. There is no consensus in the middle east to raise prices in concert as they did back in the early 70's. In an interconnected global economy, the free flow of oil at market prices benefits all sides, and politics will not interfere in any meaningful way.
The best course for investors is to focus on what matters in the long term: earnings and dividends. And don't be surprised if Exxon announces an increase in April.
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).