About Me

Retired chief investment officer and former NYSE firm partner with 40 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 !!!

Wednesday, February 15, 2012

Oil Price -- For Top Guns Only

Today, Iran threatened to cut off its six largest EU buyers in retaliation for the EU proposal
to embargo Iranian crude. The US does not buy Iran crude, but does have a plan on the table
to push SWIFT -- the global payments and deposits clearinghouse -- to cut the Iranian central
bank and its member banks out of the system. Such dual EU / US action would if enacted have a
serious negative economic impact for Iran, as it would take a substantial amount of time to line
up new buyers for all of its crude and establish what would be at best an inefficient and risky
new payments / deposits clearing system.

The dispute has been going on for several months and has added $20 bl. to the price of crude
by my estimate. So, Iran has been a major beneficiary as have the nervy traders who have been
long crude during an especially weak seasonal period. There is overhead resistance for crude
around the current price, so traders need to decide whether the political tiff has deepened enough
to warrant further commitment on the long side.

Since I think only the guys with superior market intelligence should be playing in this market
now, I am a bystander, and if you are tempted to play -- long or short -- it would be wise to
review whether or not you have timely access to info you need to handle a very complicated and
risky situation.

I plan to monitor the situation carefully primarily because my research suggests that WTI crude
above $95 bl. will tend to be a stronger drag on broad economic output growth.

WTI Crude

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