Light Sweet Crude hit $119.50 bl. today. Not a bad move, given
that crude touched $50 in Jan. '07. For my part, this is simply
another market mania evolving into a price bubble. And my
charts say the bubble level is $170 bl., double the breakout from
the long term trend of $85 bl. back in Sep. '07. Whether the price
extends up to $170 or not, I have no idea. Saxo Bank's strategist
has oil hitting $175 by late '08 and sees chaotic economic and
currency conditions as a result. A further sharp run-up in price
from the current level will turn the background noise of consumer
discontent into a roar, with unpredictable consequences, save for
eventual retribution for OPEC. Piggy Asian food exporters are now
also trying to cartelize the export of rice and grains, with this latest
insult serving to create increasingly widespread unrest among the
world's poor, who cannot afford these prices.
There is no shortage of managers of large pools of funds out there
who think they can enjoy the run and manage their risk in rapid
market conditions. Morever, if you are a manager who grows fearful
as the price of oil edges ever higher, you can lose your accounts if
manic attitudes remain after the plug has been pulled.
If you are playing this market, you best make damned sure you
know what you are doing because a concert of unexpected bad news
can easily take $40 - 50 bl. off your position and crush you out.
- Peter Richardson
- Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!