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Down 27% is a pretty good thumping and the vol today is probably not well explained by Gustav (unless the oil market believed some pretty wacky things about Gustav last week). And if T. Boone Pickens sold lots of 100 puts, he is getting thumped pretty good (and if he didn’t, his opinion is just blowing smoke). Anyway, I’m not buying a Hummer just yet. Price discovery through derivatives markets isn’t supposed to be a smooth process and can’t be with things like Congressional investigations into whether pension funds are inappropriately manipulating markets. I have no bets about crude oil now, but if someone forced me to go long or short for three months - I like long better than short.
what is the size of the oil /commodity market compared to the equity markets?. i dont find the volatility in commodities to be weird at all.30-50% corrections are par for the course for commodities and even most of the emerging economy equity markets.
Doesn’t seem like energy was a great buy last week. We’re down over 30% now, from peak, we’ll probably hit the maginal T. Boone Pickens “you’ll never go below this, because I’ll lose too much money” level of $100 by the end of the week.
My finger is on the trigger waiting to buy a crapload of energy stocks. They are being way oversold in my opinion.
So spierce, is this the first time you have observed vol in energy markets? You should try trading nat gas sometime. This is pretty standard fare - and consistent with the level of vol in credit and equity markets. The futures markets are overreacting to little stuff. In due time, that will calm down and this market will be calmer. Two bright sides about this vol: a) It’s taking energy in a direction that makes it cheaper for us to drive b) It’s gotta be thumping the buy and roll pension fund types out of the market.
JoeyDVivre Wrote: ------------------------------------------------------- > So spierce, is this the first time you have > observed vol in energy markets? You should try > trading nat gas sometime. This is pretty standard > fare - and consistent with the level of vol in > credit and equity markets. The futures markets > are overreacting to little stuff. In due time, > that will calm down and this market will be > calmer. > > Two bright sides about this vol: > a) It’s taking energy in a direction that makes it > cheaper for us to drive > b) It’s gotta be thumping the buy and roll pension > fund types out of the market. I just love how people kept saying that this wasn’t a bubble, it was a “shift in fundamentals” or other such stupidity.
spierce > I just love how people kept saying that this > wasn’t a bubble, it was a “shift in fundamentals” > or other such stupidity. It was. The demand curve shifted one way thanks to the Chinese economy and it’s shifting back the other way thanks to the US economy.
spierce Wrote: ------------------------------------------------------- > JoeyDVivre Wrote: > -------------------------------------------------- > ----- > > So spierce, is this the first time you have > > observed vol in energy markets? You should try > > trading nat gas sometime. This is pretty > standard > > fare - and consistent with the level of vol in > > credit and equity markets. The futures markets > > are overreacting to little stuff. In due time, > > that will calm down and this market will be > > calmer. > > > > Two bright sides about this vol: > > a) It’s taking energy in a direction that makes > it > > cheaper for us to drive > > b) It’s gotta be thumping the buy and roll > pension > > fund types out of the market. > > > I just love how people kept saying that this > wasn’t a bubble, it was a “shift in fundamentals” > or other such stupidity. What the heck is a bubble anyway? If a 30% drop in price proves that a bubble existed, then (I dunno) 70% of stocks in the S&P have been in bubbles. Most commodities have been in bubbles. Nat gas is in a bubble every other week.
Damn! My penus is a bubble. It drops 30% frequently.
Pop!
It’s below $70 a barrel today.
Dear god, who would have thought that the world would be linked to the world’s largest economy? That Oil would fall below “fundamental” supported prices? That Gold would be 30% lower than peak in an “inflationary” environment, and the Dollar would be strengthening against all major currencies when the Fed is doing nothing but “printing dollars”. How could reality happen?
Nice job spierce, some good observations in hindsight. My favorite quote is: “The markets are usually right unless they are wrong. When they are wrong they get it wrong pretty fricking badly.”
spierce Wrote: ------------------------------------------------------- > Dear god, who would have thought that the world > would be linked to the world’s largest economy? > That Oil would fall below “fundamental” supported > prices? That Gold would be 30% lower than peak in > an “inflationary” environment, and the Dollar > would be strengthening against all major > currencies when the Fed is doing nothing but > “printing dollars”. > > How could reality happen? you have gotta be really naive to think we have inflation right now. its deflating like hell right now but setting the stage for huge inflation later. like water first receding from the shores in a tsunami. have you seen a tsunami?. i have.
Interesting analogy… it intrigues me as both a surfer and an inflation-fearing-investor. I wonder if anybody has ever studied the speed of inflation? How fast can things move? How do actual shortages effect inflation?
Sniff sniff
WillyR Wrote: ------------------------------------------------------- > I think that given the US dollar decline, a lot of > the run up in oil has yet to come. With $150 > already somewhat of an expectation, longer term > market particpants are looking towards $200 a > barrel. I personally don’t see the bubble…nore > do I see a bubble with Potash. With Nortel the P/E > Ratio topped out at like 120 times. Take half of > that, 60, and you’ve got Potash at $270 or a nice, > 25% return. And if you figure EPS growth to, say, > $7 you’ve got a $420 share price for almost a two > bagger. > > Willy
Haha I saw that one but wasn’t going to say anything.
I called oil bubble back then and still didn’t expect it drop so much. For the next 3-6 months, I gonna call long oil. The upcoming OPAC meeting will revise down supply and the market underestimate oil demand. Hope 3 months later we found my post to be right again.