Sometimes, what is missing tells more than what is present. Take the stock market response - or lack of it - to the sharp fall in the oil price. The near indifference shows just how financially fragile the world remains more than six years after the failure of Lehman Brothers.
A barrel of Brent crude is more than 40 per cent cheaper now than in June. If most of the money saved by buyers was sure to go into alternative spending, the drop would amount to a pretty significant stimulus, pushing up demand in stagnating Europe and Japan by as much as one per cent. This consumer jamboree would be good for corporate profits, especially as fuel expense will be coming down. If the economy followed text-book rules, losses among energy producers would be far outweighed by the gains everywhere else.
And yet, the S&P 500 index of US stocks is up only three per cent since June, and the MSCI World index is down three per cent. Shares may have been expensive to begin with, but stock-market investors rarely worry about valuations when they are responding to good news. The market does not seem to view cheaper oil as a significant welcome development.
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The interplay between weak finance and a falling oil price is neither obvious nor predictable. Firms that are exposed directly to a declining oil price may not register falls in the value of their assets if these are not marked to market. They may even take gains on any marked-to-market financial hedges.
This makes it hard to value the oil dividend for corporate profits, and investors are wise not to try too hard.
