About four months ago, it became clear that very low oil prices and much cheaper gasoline were not a good thing for the stock market. Now, the world’s largest commodity and the global indexes are trading in a near lock-step with correlations over 90%. This is close to cats and dogs living together—until you look at it a little closer; then it only seems slightly bizarre. [pullquote align=”full” cite=”” link=”” color=”” class=”” size=””]The most important concept is that of oil as collateral. Borrowing (and lending) for energy has exploded in the last couple decades[/pullquote] For most individuals and many economists, a higher oil price appears as a tax on the consumer because transportation, heating and energy-sensitive food costs represent a meaningful part of the monthly

People who know I used to be an investment advisor do not ask me whether they should buy or sell. Most people want to know why the market is doing what it is doing. And they are right to ask that; if the cause is seen as temporary, they would probably hold. If the cause appears to be more fundamental or “secular,” they consider reducing exposure to falling stocks. Okay, so why is the market falling? The single biggest reason stocks are falling right now, is because China’s economy is stalling out. Some context first: China has been the fastest growing major economy in the world for years. Their contribution to global growth has eclipsed even the US for years now because even though their