I've been a follower of The Oil Drum for a while now, and love to check in for their articles, or, the ones I understand, at any rate, as they have an uncommonly high signal-to-noise ratio. Today they have the most succinct and cogent explanation of the oil situation that I've ever seen.
Well worth looking at.
4 comments:
Oh, pretty graphs :-)
I tend to agree with this... though I'm more convinced that futures and market gaming are a larger factor than we think.
The fact is that there is a lot of wealth chasing a decent yield investment these days - and commodities are about the only guaranteed money making game left.
There's truth in that: even though (as they point out in the article) for every long position there must also be a short position taken, in times of mania that short position is more likely to be someone cashing out a long position than someone who's actually feeling bearish.
If it were just speculation, though, I'd be less concerned, since eventually most speculators get spanked.
I never said the investment was smart... look at Bear Stearns or CitiGroup vis-a-vis the housing bubble.
Stupid investment is still better than the alternative... no investment. It's about at the level of gambling though... just enough money is being made to fuel the market.
I'm still impressed that we haven't fiscally imploded yet. Bernanke's going to be sainted I predict.
Yeah, bailing out JPM via the Bear Stearns thing really saved our collective bacon.
As to the other issue, if it were merely a matter of speculation I believe it would have corrected by now (with someone profiting handsomely from the smackdown).
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