Probably a lot of people will think I'm crazy, but I'm getting extremely bearish on US equities. With current cost of oil, I think we will see some significant fallout in equity prices this summer and into the fall. There is no way airlines have a chance of turning a profit with ticket prices where they are and oil at $140/barrell. This is a doubling of their costs from a year ago. The smarter airlines have hedges in place, but at some point the futures will expire and they will be forced to buy at higher prices.
I hope I am wrong, but I think bad times are upon us. Maybe slowing demand will burst the commidity bubble, but we aren't there yet. If oil prices remain constant we will see inflation that is unprecendanted in my adult life. Commodity inflation costs have yet to be passed to consumers, but at somepoint they will be or many firms will be bankrupt.
This also going to sound crazy, but I'm planning on living big in the next few months before the commodity prices catch up. Many things I enjoy in life sushi, beer, fresh fruit, etc are extremely commodity intensive to produce. Right now sushi restaurants haven't raised their prices. I believe I can eat and live well while restaruants and retailers absorb the increased costs. At some point this will run out and they will pass the costs on to me. In the mean time I am eating fresh fruits, vegetables, and sushi like they are going out of style, because they will be. Mark my words, I will not be able to buy toro at these prices next year.
Or my bearishness might mark the top of the oil market. Time will tell.