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"We are moving headlong into oil," notes John Reese, who analyzes stocks based on the criteria used by "legendary" investors such as Buffett, Graham and Lynch.

In his Validea newsletter, he says, "My fundamental models indicate that the oil industry is where the best values in the market are." Here's a look at W&T Offshore (NYSE: WTI), which is based on the criteria used by contrarian David Dreman.

"The economy and stock market have gone through a legitimate crisis because of the credit woes, and it takes time for something like that to work itself out.

"But the important thing to remember is that we've been through financial crises before -- even bad-debt financial crises like this one -- and the market has always stabilized and then pushed higher.

"And history has shown that those who can stick with the stock market through down times like these will be rewarded.

"David Dreman -- one of the gurus I base my strategies on -- notes in his recent Forbes column, 'If you pack up now, chances are you'll miss a good part of the next bull market. A large part of the gains are always made in the first few months of one, when market-timing investors are still on the sidelines.'

There are lines of reasoning, and then there are lines of reasoning.

European Central Bank board member Axel Weber said Wednesday there's no plan for interest rate cuts and policy makers may, in fact, have to raise rates as the economy accelerates out its slump, Bloomberg News reported. He added that "monetary policy is where it should be" and that "discussion about declining rates in Europe is premature."

Weber's comments occur after Eurostat reported that Europe's economy contracted 0.2% in the second quarter (pdf), amid signs of slowing in business investment and consumer spending, and sagging business confidence.

London-based economist Mark Chandler told BloggingStocks Wednesday that data he's reviewed indicate Europe's economy will continue to slow in Q3, which is why he's somewhat taken aback by Weber's comments.

"Weber's comments are a bit troubling. I mean, what data is he looking at? The comments will create a bit of a row [dispute] in the U.K. because our economy is not going to contribute to the recovery he sees, not at this stage," Chandler said.

In the margins of Barron's this week there was a smallish note about the government of Venezuela nationalizing Cemex's (NYSE: CX) operations in that country. For some reason the government of Hugo Chavez thinks that stealing all of the private companies in 'his' country will lead to greater prosperity for 'his' people.

While it is a long journey from Venezuela to Zimbabwe, with its exponential inflation rate and a near-total economic breakdown, every journey begins with a first step. Mr. Chavez will move much closer to this inevitable outcome if he continues on his chosen path.

Motley Fool has a good write-up on the subject in which they detail the sour relations between Chavez and foreign businesses. Chavez recently offered to re-open negotiations with Cemex, but since he has already decided to take the company, that offer is suspect -- you can't negotiate with a gun pointing at you. To date, Chavez has nationalized the telecommunications industry, electricity, and oil. How many steps down the road is that? Why would anyone want to invest in Venezuela?

The dollar's rally resumed Tuesday, but for reasons that may give stock investors cause for concern, at least short-term.

The U.S. economy didn't propel the dollar higher -- the economy is in its worst condition in at least a decade. Nor did the prospect of rising interest rates strengthen the dollar -- the U.S. Federal Reserve has taken a pause in its rate-cut cycle, but may have to cut rates again this fall, if the U.S. economy weakens further.

The catalyst for the dollar's renewed rally? Concern that Europe's economy will fall into a recession, compelling the European Central Bank to cut interest rates, which would make the dollar more-attractive.

Traders increased their positions in the dollar Tuesday after Germany's most-widely followed index of business confidence, the Ifo institute's business climate index, fell to a three-year low of 94.8 in August from 97.5 in July, Bloomberg News reported Tuesday.

On the heels of the above report, the dollar strengthened 1.5 cents versus the euro to $1.4593, and 1.8 cents versus the British pound to $1.8352. The dollar also rose about one-half yen to 109.79 versus Japan's yen.

Currency trader Andrew Resnick, a dollar skeptic due to the dollar's many false breakouts to the upside, told BloggingStocks Tuesday he'll become a dollar bull if the rally holds through the U.S. Labor Day holiday period. Resncik added that he's presently flat, or has no open currency trading positions.

Two organizations, one projection: a forecast of 86.9 million barrels of oil per day consumed in 2009.

The International Energy Agency and OPEC arrived at the same projection, suggesting that, in economist Peter Dawson's interpretation that "2009 is going to be a year of a slowdown in oil consumption growth, which is significant."

Moreover, Dawson is quick to highlight what's important in the above: slowing oil consumption growth in emerging markets. Oil consumption in the United States has been falling for more than two years -- it's projected to drop 3.1% in 2008 and another 2.3% in 2009. It's oil consumption in the developing world, primarily China and India, that really moves prices, Dawson said. Oil Monday closed up 52 cents to $115.11 per barrel.

'A small victory, that we'll take'

Right now it appears, for the first time in more than five years, consumption growth (not to be confused with a consumption decline) will slow, he said.

"It's a small victory, that we'll take, regarding the oil markets," Dawson said. "For the first time in a while we'll see some demand relief internationally, and that has to help lower oil prices."

It's been said that old habits die hard.

And one habit likely to change is European Central Bank President Jean-Claude Trichet's penchant for delaying interest rate cuts until the last possible moment, so says economist Richard Felson.

"In this case, Trichet will be joining the Fed's rate cut party this fall," Felson told BloggingStocks. "In fact, if economic conditions continue to worsen in Europe, they may even precede the Fed with a rate cut." The ECB next meets to discuss rates on September 4; the Fed, on September 15.

The Fed, as investors / readers are aware, has paused in its rate cut cycle, after decreasing interest rates by 325 basis points, to 2% from 5.25%, in an effort to jump-start a U.S. economy dragged down by its worst housing slump in a generation. Meanwhile, the ECB has remained in restrictive monetary policy mode - - first increasing its refinance rate by a quarter-point to 4.25%, in mid-2008, then taking a stand-pat stance, citing inflation pressures.

"We've looked at several ways to play anticipated growth in wind energy; we've also considered titanium makers for that industry's ties to the production of lightweight, modern aircraft," notes Bill Martin.

In his BullMarket.com, he explains, "While the two trends might not appear to have much in common at first glance, Hexcel Corp. (NYSE: HXL) offers a way to play both the aircraft and wind markets.

"The connection is the lightweight, composite materials Hexcel makes that are used by producers in both sectors. Hexcel develops and manufactures advanced structural materials.

"It is the largest U.S. producer of carbon fiber; the world's largest weaver of reinforcement fabrics; and the number-one producer of composite materials.

"Its product was initially developed for the aerospace industry, but is now used in a wide range of applications -- from golf clubs to satellite arrays, and from the rotor blades of wind turbines to life-saving monocoques for Formula 1 race cars.

"It's been a rollercoaster ride for Hexcel's stock in the past 12 months. The shares hit their one-year peak of $27.19 in December 2007; by January 22nd they had plummeted to $17.. The shares rebounded through May, only to fade again. Year to date, HXL is off about 15%.

There are signs that banks and others are expecting another round of credit write-offs. Banks are becoming more hesitant to lend on speculation credit losses will increase as the global economic slowdown deepens, Bloomberg News reported Monday.

For borrowing, banks are charging each other a 77-basis-point premium above what traders predict the U.S Federal Reserve's daily, effective Federal Funds rate will average over the next three months, up from 24 basis points in January, Bloomberg News reported.

Banks concerned about potential write-offs, global slowdown

Economist Peter Dawson said Monday two factors are driving the widening short-term lending spread.

"Rightly or mistakenly, there's a suspicion that selected banks will announce another round of write-offs," Dawson said. "Second, banks are coming to grips with the reality of the global slowdown. The slowdown suggests reduced revenue for banks, which would further hurt already strained balance sheets, and make banks more-reluctant to lend."

In August 2007, banks began to hoard cash and pare-back lending after subprime mortgage defaults forced two Bear Stearns hedge funds to seek bankruptcy protection. A series of regional, mortgage asset-related write-offs followed, as the housing boom ended, first in the United States, then in the United Kingdom. Mortgage-related credit losses now total more than $500 billion worldwide, Dawson said.

Just when there are signs that emerging market demand (and institutional investor frenzy) have eased in the oil markets, up pops an old friend: geopolitical risk.

Moreover, this time the old friend, 'Middle East Tensions,' brought along his long/lost cousin, 'Enboldened Russia.'

Russia's re-appearance on the international stage takes the form of a major power, not a geopolitical power capable of projecting force globally as during the Soviet era, but the gradation is minor as it relates to the oil market, so says economist Richard Felson.

"Russia has the capacity to create a remarkable amount of distress in the oil markets. It can use oil exports and natural gas as a lever against Europe and the world, and its territorial threats to Central Asia and Eastern Europe are also cause for legitimate concern," Felson said.

Oil fell $3.03 to $118.15 per barrel Friday at mid-day after Turkey restored oil flows through the Caspian Sea pipeline, Bloomberg News reported Friday. The Baku-Tbilisi-Ceyhan pipeline moves oil from Azerbaijan through George to Turkey's Mediterranean coast. Oil flows were stopped earlier this month after Russia invaded Georgia.

The other, major energy commodities also fell sharply Friday at mid-day on the Baku pipeline news. Unleaded gasoline plunged 11 cents to $2.93 per gallon, heating oil declined about 10 cents to $3.19 per gallon, and natural gas declined 14 cents to $8.11 per million BTUs.

Russia: a threat to the west's oil?

Further, Felson said Russia's action "have caused the west to re-evaluate the global oil and energy equation" to account for the new - - and unexpected - - Russia wild card.

"Whereas before the prevailing view was incorporation of Russia into the oil and energy markets and as a net-plus for production and supplies, long-term, the new view is guarded," Felson said. "Not only are supplies from Russia now viewed as liabilities, but the west now has to ask, 'what other oil-rich areas might Russia might try to threaten?' And what about it's natural gas relationship with Germany?" [Russia supplies about 20% of Germany's natural gas.]

With the world's top central bankers gathering in Jackson Hole, Wyoming for their annual retreat, amid the global economy's worst credit crunch in a generation and slowing GDP growth in every region, BloggingStocks asked a few economists what, in their opinion, should be on the central bankers' minds.

Economist David H. Wang – "I bet they sneak away for a few minutes to watch the United States versus Argentina [2008 Olympics] semi-final basketball game today. I would. Seriously, on the one hand central bankers face the prospect of another round of housing-related write-offs and the need to intervene to keep markets liquid. On the other hand, we still have oil-fed inflation in the system, so my sense is they will issue a statement indicating that the major central banks 'stand at the ready to provide additional liquidity and take other measures' to keep markets functioning."

Economist Peter Dawson – "I would really like to see some European Central Bank comments from [President Jean-Claude] Trichet that he's ready to cut rates and that the greater risk in Europe, like the U.S., is toward recession. Demand in Europe is slowing, and if E.U.-U.S. trade flows continue to decline, that will prolong the recession. Hence, ECB monetary policy is intrinsic to the recovery story."

Economist Glen Langan – "Probably the most important item on their agenda, after maintaining liquid, functioning markets, concerns long-term interest rates. They haven't fallen, due to banks' reluctance to lend, in order to repair their balance sheets. Housing faces a 2-3 year recovery period but we'll need long-term mortgage rates for 30-year fixed loans to drift back toward 6.00% or 5.75% to speed housing's transition back to health. If monetary officials don't find a way to get long-term rates to trend lower, that delays the recovery."

The United Kingdom's economy was unchanged in Q2, weighed-down by the contracting housing sector and a pull-back in consumer spending, the U.K.'s Office for National Statistics announced Friday.

Economists surveyed by Bloomberg News had expected the U.K.'s economy to grow 0.1% in Q2.

For the last 12 months, the U.K. grew at a 1.4% pace, the ONS said.

Further, the lack of growth in Q2 ended Britain's longest expansion in more than a century, London-based economist Mark Chandler told BloggingStocks Friday. The U.K.'s last recession occurred in 1991.

U.K. mirrors U.S. slowdown?

Further, as in the U.S., Chandler said concern is growing in the U.K. that declining housing sales and median home prices will serve as a drag on the U.K.'s economy through 2009, perhaps longer.

"Estimates vary in the United States, but I put housing's contraction effect at about 0.7-1.0% of GDP in the U.S., and perhaps a little lower in the U.K.," Chandler said. "Home equity loans were not as common during the housing boom as in the U.S., and that's why I don't think the slump will hurt as much here as in the U.S., but we're still seeing at least two quarters of negative growth, which will slow regional growth, as well."

With great fanfare, General Motors Co. (NYSE: GM) announced it was spending $500 million developing the Chevrolet Cruze, a so-called next generation compact car. Investors, who have seen the value of GM's stock slip 60 percent this year, could not have cared less. Shares of the company, which for now is the largest automaker, closed down for the day.

Granted one car is not going to revive General Motors' fortunes, but the Chevrolet Cruze clearly is a step in the right direction. For one thing, it's got a nice design though it certainly did not blow me away. The automaker clearly is trying to build on the popularity of the Chevrolet Cobalt whose sales are up 16 percent year to date. It aso underscores how General Motors is trying to be more efficient.

"The Chevrolet Cruze was designed and engineered by our global teams in Europe and Asia Pacific and will be manufactured in those regions in addition to the assembly plant here in Lordstown, Ohio," said Chief Executive Rick Wagoner in a press release. "Our goal for the Chevrolet Cruze is to lead in fuel economy in this very competitive car segment.

But it's also taking a gamble here.

As the Wall Street Journal points out, "The auto maker believes growing demand for nicer, well-equipped small cars coupled with a dramatic redesign for the Cruze will be enough to command sticker prices well beyond the $15,000 base price of a compact Chevrolet Cobalt."

For Wagoner to keep his job, he's going to have to sell lots of them along with the company's pick-ups and SUVs, which the company and consumers are less enthused about.

Airlines globally could lose $6.1 billion in 2008, on soaring oil prices and financial market dislocation, the head of the International Air Transport Association said, The Wall Street Journal reported Thursday (subscription required).

Giovanni Bisignani, managing director of the IATA, which represents 230 airlines, called the sector "a fragile industry in a crisis" and that it's "bracing for more situations of airlines collapsing," due to high fuel prices and lower revenue, The Journal reported. Further, the air travel slowdown, once thought to be contained to developed nations, has spread to global air travel's plum: Asia, he added.

Airline slowdown could hurt Boeing, Airbus

Stock analyst and frequent flier C. Leonard Bauer told BloggingStocks Thursday if the Asian hemisphere is slowing, to go along with sluggish revenue statistics in Europe and the United States, the slowdown "would have wide implications, not just for airlines, but for airplane manufacturers Boeing and Airbus."

"Further consolidation globally, was a given, particularly in nations like India, which had too many airlines even before the global economy slowed, but the concern now is that national carriers will postpone or cancel plane orders," Bauer said. "From a U.S. perspective, that could mean bad news for Boeing. And what's bad news for Boeing is bad news for the U.S economy. Airplane sales have been one of the U.S. economy's few bright spots." [Bauer added that he does not own shares in or have a rating on any airline or airplane manufacturer. However, Bauer does have frequent flier miles/points in American Airlines (NYSE: AMR).]

It would appear to be axiomatic to say that there are few benefits from an oil price over $100 per barrel. Nevertheless, during oil's latest climb to the stratosphere, some have argued that a high oil price is 'net-positive for the global economy,' or 'a long-term good thing.'

Economist Glen Langan has a word for insta-analysis like the above. "Misguided," he calls them.

Not that Langan is an ardent advocate of oil use; hardly. Would that the developed and developing world could shift today to an alternate, renewable, and more environmentally-friendly energy form, he says. But the world can't, and as is some times the case in social science circles, "the normative influences the empirical," he says, and leads to curious conclusions like an 'oil shock being net-positive for the global economy.'

For the record: an oil shock is never net-positive for the global economy, Langan argues.

There are some benefits, to be sure, such as increased conservation, increased research on alternate/renewable energy forms, a transfer of some wealth to some developing nations and, of course, astounding increases in wealth in those connected to oil and oil services, but the overall effect is net-negative. Oil traded Thursday up $5.46 to $121.42 per barrel.

Japan's yen resumed its rise against higher-interest currencies Thursday, suggesting that the prospect of additional credit market losses continues to lower investors' confidence in global growth and performing assets.

The yen rose as institutional investors continued to decrease their use of the carry trade.

In a carry trade, investors, especially institutional investors, borrow funds in a country with a low interest rate (or borrowing cost) and buy assets in a country where returns are higher. The investment can take many forms, including stocks, bonds, funds, or even the higher-interest currency itself.

The yen strengthened about 1.6 yen to 160.71 versus euro, about 3 yen to 201.95 versus the British pound, and about 1 yen to 108.20 versus the dollar.

Another big mortgage write-off ahead?

Currency trader Andrew Resnick told BloggingStocks Thursday sentiment is building in the foreign exchange and other markets that there will be "another, major housing-related write-off by a bank or series of banks in the U.S. or U.K, or possibly Fannie Mae (NYSE: FNM) or Freddie Mac (NYSE: FRE) problems."