–I saw a Reuters article this morning that “explained” that a two-month surge had allowed the US stock market to catch up with Europe, year to date. That’s because, the author wrote, the US market is up about 5% in dollars, ytd, and Europe is up by the same in euros. This, of course, ignores the fact that the euro is up by almost 13% against the USD. ???

–I also recently read a similar, but longer “strategy” piece from a major investment bank. It pointed to the Arab-Israeli war of 1973 as the trigger for an almost decade-long rise in the global oil price–and the years-long meander of the US stock market, as well. Implied but not stated is that the former caused the latter.

There’s a bit of truth to this, but it’s by no means the whole story. There’s the creation of OPEC, to counter the vast market power of the international oils in setting prices–and the war doubtless created great group solidarity for the ensuing boycott of the US. But from a stock market point of view, there was so much more than oil. The decline of the Nifty Fifty “one decision”–i.e., buy and never sell–stocks, the collapse of the then-important UK economy, increasing competition from state-of-the-art plant and equipment in rebuilt Germany and Japan (US Steel, for instance, was still using blast furnaces from the 1800s–and maybe it still is, for all I know) and the domestic shift from urban centers to the suburbs as hotspots of economic growth all played a significant role in shaping the 1970s US.

Congress didn’t help the oil situation, either. The federal government took over the allocation of refinery output, creating gasoline shortages galore. And it set the selling price of crude discovered before 1970 (?) at a very low price, while allowing newly discover oil to be sold at (much higher) market prices. So, as far as I can see, and something confirmed to me by company managements after the fact, Big Oil simply stopped production from older wells, adding to the shortages.

To me, the interesting part of this is the suggestion that the deep reservoir of accumulated knowledge that characterized the major investment banks a generation ago is no longer around.