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This is the fourth in a series of five articles regarding my thoughts and lessons about the 2008 stock market correction.
Firstly I confess. I drive a Toyota Sequoia SUV. I was hit head on at a stop sign by a waste disposal truck a few years ago while driving my son and the damage stopped before my windshield. I have a family and I feel safe in my vehicle following this accident. Now that I have attempted to justify $100 to fill my gas tank I will move on to the point of today’s topic; Prices always gravitate toward the norm.
When I bought my SUV gasoline prices were such that a full tank was around $35. I then watched with horror as gasoline prices went over $2 a gallon. Then they gradually went over $4 a gallon when oil was near $150 a barrel over the summer! The total cost to fill my SUV reached $95! I considered selling my car but the SUV market was terrible. Even with my cars I always consider “Buy low Sell high”. I kept reminding myself that prices always gravitate toward the norm. “Just wait” I told myself. I was relieved to fill my car last week for under $50 with gasoline prices now under $2 per gallon in the area and crude oil back to around $60 a barrel.
Many believe that oil prices will rise again. It does make sense that over the long term oil prices will continue to increase due to limited supply and the growing population. Prices tend to gravitate toward the recent historical norm however after such rapid and extreme upward movements. In general this is true with all asset classes. As investors it is wise to remember this.