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Jun 9, 2008 9:39 am US/Eastern
Expert: Oil To Hit $170, But No Need To Panic
Economic 'Guru' Tells WCBSTV.com No Need To Panic Over Gas; Housing Crisis A Different Story
By STEVE FINK, WCBSTV.COM
NEW YORK (CBS) ― Oil prices shot up more than $10 on Friday to a record $139 per barrel, but that's nowhere near the ceiling where one economic expert predicts prices will surge.
And while the Dow Jones took a major hit as a result of the oil spike, the stock market will pick up later this month and "surprise everyone."
Charles Nenner, dubbed a "guru" by the Wall Street Journal and an "oracle" by CNBC, makes a living studying economic cycles and predicting market trends. In an interview with WCBSTV.com, Nenner says that by the end of next year oil prices should top out near $180 before sliding back down to earth, while the housing market won't see any kind of relief for years to come.
Still, despite his bold statements that some might find frightening, Nenner, a Touro College professor from Amsterdam, says there's no major need to panic – at least not about gas prices, the stock market, or even a recession.
Here are excerpts from Nenner's interview with WCBSTV.com Managing Editor Steve Fink:
SF: The economic slowdown is on everyone's mind these days. If it's not gas, it's the housing market. If it's not the housing market, it's the stock market. What's going on?
CN: What's happening is we wanna develop the rest of the world, and one of the reasons is we want to develop the rest of the world so that we have a market that will buy the goods we're making. So, talking for instance about India and China and other countries, those people now have a booming economy. And a booming economy needs a lot of industrial production and needs a lot of oil, and if you look at other things, for instance, the amount of cars the Chinese have, and especially India, it is still like only a few percentages compared to the west. So of course, these guys are gonna have some money to buy cars, and there are what, a couple billion people over there? So lot of cars are going to come into the world and they'll need a lot of oil.
The same is true for food prices, I mean finally the people have some money to eat well, so of course the prices of wheat and beans go through the roof. And of course after that, they want to eat more meat because people start having some money, so of course the next thing that's going through the roof is the price of cattle.
It shouldn't be surprising to anybody because there is a whole new market, a huge market, for these things.
SF: Explain your use of cycles you use to predict market trends, and using those trends what can you predict for the near future?
CN: My work and what I do with this cycle work is that I think things move in cycles. We can predict how the movements are. In a moment I'll get into the cycle of crude, but it can be based on the industrial production explosion in the east that's also a cycle. And it shows that there is no relief until the third quarter of 2009 in crude prices and gas prices. We're now in a phase where we get some big moves up and down, but in the long run, the prices will go up at least til the third quarter of '09.
SF: Where do you see prices going?
CN: I think they could go up to $170 plus/minus, it wouldn't surprise me. For the moment, they're kind of stuck in the range I think between $135 and will probably go to $110 or $115. The problem is the gasoline prices should be moving between $3.50 and $4.50, and the only problem is that oil companies are not that nice to us, which means even if crude goes down for a couple of weeks, they're not so nice to immediately lower the price. So I think it's gonna stay more on the upside than the downside.
SF: So you're saying $170 is more than reachable?
CN: Yes.
SF: And do you think it could get any higher? Is that the ultimate ceiling?
CN: I don't think [it will peak] until the third quarter of '09, but if the world expansion continues and the economy picks up and more poor countries are going to become part of the developed industrial world, it definitely is gonna pick up higher.
SF: Why the third quarter of '09? What is then going to cause it to dip?
CN: See that I don't know. My system works in such a way that it's the same thing as a business cycle – you know when something is going to top out and anything can happen. You don't know – even a war can happen, anything can happen, that's not clear. But you see, the prices are in a certain movement and if you extrapolate that movement then it will continue until the third quarter of '09.
But it's not as bad as people think. I'm from Amsterdam in Europe, and you should know in Europe they pay more than three times the price that they pay over here and the economy is not worse in Europe than it is over here. That's one thing and the other thing is the oil now it's $130, if you take off the inflation than it may be equal to $30 about 15 or 20 years ago. So it's not as bad as people think.
SF: And $170, what's that going to mean for gas prices?
CN: That means they'll go up to the top at about $4.50. I had said they should go $3.50 to $4.50, but I'm not so sure about the $3.50 because like I mentioned I don't think the companies are so nice to lower the prices if the price of crude goes down. They'll probably say, "Let's see and wait," and wait a couple of months and then it goes up again and they'll never lower the gas prices.
SF: So with the cycle, it then goes back down. But will it go down gradually? How long do these cycles go for? And how far ahead can you predict with these cycles?
CN: Well if you look at it, cycles it can go forward like 40 or 50 years.
The oil price cycle, it goes down until March 2011.
SF: So these are basically models – what is creating these models?
CN: The whole thing is based on the fact that things don't move at random. That's a theory. Most people will say anything can happen. And we say, giving an example, if we throw a ball in the air, then it has a certain momentum and more or less it's gonna stay for five seconds in the air depending how high it goes. If the crude price starts picking up or stock market starts picking up a certain power, you know how high it goes and how long it will stay up.
So the same thing you can do with the stock market – for instance the stock market is what everyone is worried about. But we're not, we think by the middle of June the stock markets will pick up and surprise everybody. You ask me why? Based on the cycles, that's what is supposed to happen.
SF: So a lot of this is just over-population causing demand?
CN: I wouldn't say overpopulation. I would say the adjoining of the poor countries to a higher lifestyle which means that they'll want to eat more, they want to eat better, and food prices go up. And they have factories that they develop and they'll need crude oil, and they'll drive a lot of cars, etc., etc.
SF: If you think about it, the third quarter of '09 is just a year or so away. So should we say, let's not panic, we just got another year of this, we can hang in there?
CN: The question is why should we panic? Like I said, in Europe, the gas prices are three or four times more expensive and the economy is doing well. I don't know why everybody seems to panic, I mean I don't see that it's creating so many problems. It's problematic for the airlines. But I still see people driving. If it were problematic you'd see that people are using less gas, but the numbers that I see show that nobody is driving less so it doesn't seem to create a problem. It's more psychological. Once you see that people are cutting back on their gas input and gasoline demand is less, then you would say, 'Oh, we're having a problem.' But we're not having a problem yet.
The thing is, I remember two or three years ago, they said if crude goes to $35, $40, it's gonna choke the economy. We'll nothing happened and now we're at $130 and now they're gonna say every dollar is gonna kill the economy. Well that's what they said $100 lower also.
SF: Recession. Is this gonna happen?
CN: I've been saying this the whole year. Usually what happens is people talk about recession after it's there. And this is the only recession everybody declared without being in a recession. And I don't think we're going to be in a recession.
SF: Because of the fact that in a year relief is on the way?
CN: Because of the fact from the middle of June the stock market is picking up and the stock market will not pick up if there is gonna be a recession. It's not so bad the whole situation if you look at the economy. The only problem is the housing prices, and also for that there is no end in sight. That will take a long, long time. The rest of the economy is not so bad.
SF: And regardless of this, people should not panic, is what youre saying?
CN: Where's the panic? The panic is that gas prices are high?
SF: There's that. And there's obviously the housing market.
CN: The housing market, they should panic. It's gonna be worse than people think. My cycles shows there's no stop, and I declared this on CNBC a few years ago, that this cycle goes until 2025.
SF: Through 2025?
CN: Yes, because you see here you have another problem. I'm in Miami and interestingly, you see the foreclosures, they're not with houses where people live. They're in houses that are empty and were bought by speculators. But if you look at what the middle class has available for money to buy a house, and you see the prices of the house, you see that they cannot buy a house. It's just affordability is not there.
SF: And there is no relief in sight at all.
CN: No, no relief. And again, people that say, "Prices always go up," it's because they get that from their fathers or their grandfathers from the last 60 years when the direction was up. Sometimes you hit the top and then the direction is down, and then even if you have a year of better housing prices, the bubble has to burst and it will take another almost 20 years.
So there's no end in sight for that, but again the rest of the economy looks good. So I think it will keep us out of recession, it will balance out.
-----Original Message-----
From: Clyde Lee(swb) <clydelee@xxxxxxxxxx>
To: realtraders@xxxxxxxxxxxxxxx
Sent: Sat, 1 Nov 2008 4:09 pm
Subject: Re: [RT] Charles Nenner The Cycles Guy
One way of doing an estimate of future dates and prices is shown
in the attached. See the notes on the chart.
Clyde
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Clyde Lee SYTECH Corporation
7910 Westglen Phone: 713.783.9540
Suite 105 Fax: 713.783.1092
Houston, TX 77063 www.theswingmachine.com
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----- Original Message -----
From: "chaze" <chaze@xxxxxxxx>
To: <realtraders@yahoogroups.com>
Sent: Saturday, November 01, 2008 11:07 AM
Subject: [RT] Charles Nenner The Cycles Guy
> Any idea how he's putting this together?
>
>
> http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/vRDU42uJ9mSo.asf
>
> Also see:
>
>
> http://timworstall.typepad.com/timworstall/2007/12/charles-nenner.html
>
> ------------------------------------
>
> Yahoo! Groups Links
>
>
>
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