Our current economic crisis started on Sept 11th 2001.

The Bush administration, along with Congress and a host of others,
made great efforts to prop up the economy. The straw that broke
the camel’s back was coated with oil. The surge in oil prices broke
the economic dam of America. All the efforts to prop up our economy
that continued until mid 2007 seemed a success until the economy
slipped in the rising price of oil and continues to fall. Today,
the dollar’s decline and OPEC’s plans to reduce daily output by 2.2
million barrels had no effect other than a close below $40.

When the dam of a lake breaks and the water rushes out, its level
drops. Stopping the out flow does not fix the dam and you can’t
expect the lake to return to the past level until you stop the
decline and repair the break. In July we broke the dam of our
economy and simply believing that it will shortly return to recent
levels is foolish. It’s like thinking the lake will just fill back
up once it hits the low level and again begins to rise…….the dam
is broke and the lake will not hold water until the dam is repaired
and it rains enough to fill the body of water.

All we have seen so far is our economic dam has broken and the
level continues to drop to new lows. You never can repair a dam (economy)
as long as it is loosing water and eroding (oil prices and stock
market dropping). You must first let it fall or empty to a level
able to be repaired. Then you must repair it so it once again
will hold back the water and pray for rain (business, economic growth)
to refill the body.

We are nowhere close to the bottom of the market. I am adjusting
my comments from Sept that oil will go below $40 barrel. I think we
will soon see oil well below $20. We have not seen anything yet.

But then, like always, the price will go back up. Boone Pickens recently
said as much: http://www.oregonlive.com/business/index.ssf/2008/11/pickens_oil_prices_heading_bac.html

So oil will go down and then up again…and so will our economy.

- Randy Hill