So much for THAT magazine cover indicator!  That has to be the fastest any call OF MINE has been proven wrong –  a new mea culpa record !

Currentcoverus_large
Cover art courtesy of The Economist, May 29th 2008 issue

Crude futures approaching limit of +/- $10.00 per barrel — trading will be halted if it trades at the limit for five minutes. The crude limit is $10.00 per barrel ($10,000 per contract) for all months. If any contract is traded, bid, or offered at the limit for five minutes, trading is halted for five minutes. When trading resumes, the limit is expanded by $10.00 per barrel in either direction.

>

Crude Oil Futures, June 2008

Crude_june_08_futures

See also:

The oil shock of 2008    (Econbrowser)
The Energy Markets’ Circuit Breakers (Marketbeat)
It’s solar power’s time to shine (MSN)
Oil Rises to Record on Weakening Dollar, Morgan Stanley Outlook (Bloomberg)

Category: Commodities, Contrary Indicators, Energy, Psychology

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

81 Responses to “Crude Oil = $139+”

  1. RichardN says:

    Days like this are actually very good because they prove without a doubt that the rise we’ve had has absolutely nothing to do with supply and demand. Now it’s up to those who can stop this to actually stop it. It will most definitely continue its march onwards to 150 and beyond if nothing is done.

  2. JMay says:

    Not to pile on, but I have to agree with some of the other posters that the magazine cover obsession has gotten a little tired.

    It doesn’t reflect too well on the depth of the analysis at Fusion IQ.

    ~~~

    BR: These sentiment calls — especially squishy nondata driven types of signals — are totally unrelated to the quantitative work we do at FusionIQ.

  3. Mark W says:

    I take this rare opportunity to say I told ya so. At least as much as I should only a few days after the fact….

  4. John Borchers says:

    We have a big problem here and it’s worldwide.

    The 3 merchantile exchanges have to limit oil trading. Chicago, UK and Netherlands (I think?).

    If this is allowed to go on we will get global depression as a certainty.

  5. VennData says:

    Soros has probably gotten killed. Maybe Barack Hussein Obama should apply for gov’t matching funds after all.

  6. michael schumacher says:

    the nail in the coffin for oil is/was the Goldman call (about two weeks ago?) and now the Morgan call today

    Be nice to see what they make trading oil…but we will never know.

    Ciao
    MS

  7. John Borchers says:

    As an add on USO was 42.56 1 year ago.

    We are almost triple in one year. When that occurs normally it doesn’t take long for a bubble to pop.

  8. dwkunkel says:

    Shooting the messenger is not the answer.

  9. Andy Tabbo says:

    I guess this means the CNBC crew can stop congratuling Michelle Caruso Cabrerra “top in oil” call. I was getting tired of that. You notice how CNBC is desperate to put forward their personalities as people who have some kind of financial ability? They’re not. They’re not traders. Markets don’t peak when everyone is talking about it peaking…especially MCC.

    Santelli is the only one with half a clue.

    - AT

  10. michael schumacher says:

    We have to stop allowing the oil trades going to the OTC when they start having people ask questions. That would help but certainly not solve the problem.

    It’s an exhaustible comm. The psychology of that alone is why it’s being allowed to happen. Just say “Chindia” and “asia” and all doubt about speculation is quietly shelved by the MSM.

    The dollar tanking should put some pressure on it but not anything near what it is being attributed to.

    BTW Gas up almost .15 overnight here….SD

    Ciao
    MS

  11. Vermont Trader says:

    don’t forget about Nat Gas. UNG has been hitting 52 week highs all week….

  12. LtShinySides says:

    I think the contrarian indicators have become contrarian themselves. When you look around the blogosphere and see on TV people talking about the contrarian indicator of the magazine cover, doesn’t that kind of become conventional wisdom, in which the contrarian point of view would be the original indicator taken at face?

  13. KenL says:

    Hang in there BR. The magazine indicator is still valid, the timing just isn’t perfect. Unless someone thinks the supply/demand fundamentals of oil changed by 10% in the last 48 hours, this still qualifies as a speculative bubble in my book.

  14. Mitch Nauffts says:

    Andy Taboo wrote:
    You notice how CNBC is desperate to put forward their personalities as people who have some kind of financial ability? They’re not….

    Santelli is the only one with half a clue.

    And Rick still thinks the bottom was put in in March. (Wrong.) The rest of ‘em — well, Kiernan, Liesman, Kneale, Cabrera, and GasBag — are just cheerleaders.

  15. LtShinySides says:

    Also, for something to be contrarian in the first place, doesn’t it have to affect people’s feelings about a certain asset, which then causes them to act differently in “speculating” on the price of it? If oil prices are not driven by speculation for the most part, then why would the contrarian indicator indicate anything of magnitude?

    From a previous post of yours:
    “My own view is that speculators have contributed to the price to some degree, but the tight supplies and freefalling dollar get more blame.”

  16. patrick neid says:

    The hook is being set. The faster we get to $160ish the faster we will come down.

    Personally I never trust a word Soros says. He games the market whenever he thinks he can.

  17. John Borchers says:

    Remove the $10 loss trading halt. Double it to $20 or 20%.

    Increase the trading halt 5% up 15 minute halt.

    They need to do something next week or global markets will crash.

  18. Fredex says:

    It takes a while to turn a supertanker sized market. With a little time for perspective this top call in oil might be close enough.

  19. Marcus Aurelius says:

    Everybody games the market (or would if they could) whenever they think they can.

    BR: Man, that was a quick jump back up. I don’t think the rules apply anymore.

  20. Nathan says:

    Barry, does this parabolic move in oil in the face of weakening fundamentals alter your viewpoint that speculators aren’t driving commodity and particularly oil prices rather than underlying supply and demand?

  21. tyoung says:

    This is not their worst oil call/Mag cover by a long shot. Infamous 1999 lead article/cover “Drowning in oil” predicting $2 oil beats this by several orders of magnitude.
    http://www.economist.com/opinion/displaystory.cfm?story_id=188131

  22. DownSouth says:

    “It doesn’t reflect too well on the depth of the analysis at Fusion IQ.”–Posted by: JMay | Jun 6, 2008 1:30:00 PM

    But hey, JMay, when it comes to oil, anything goes. It all harkens back to the story of how the East Texas field was found.

    Dad Joiner, the promoter who drilled the Daisy Bradford No. 3, the discovery well for the enormous field, had a “geologist” named Doc Lloyd.

    In determining the location for the Daisy Bradford No. 3, Lloyd located the major oil fields of the world on a map and drew lines through them. The point of intersection of those lines he called “the apex of the apexes,” and that is where the Daisy Bradford No. 3 was drilled.

    When the Daisy Bradford No. 3 struck oil, however, the news for Dad Joiner wasn’t all good. He had sold interest in the well that totaled well over 100%.

  23. Jim Haygood says:

    Crude has been in a secular uptrend for seven years now. Putting even a tight, one percent time tolerance on a call for a top would give 3 weeks of leeway.

    It’s very premature to call the magazine cover indicator “wrong.” If crude is above $135 a month from now, then we can call it a miss.

  24. investorinpa says:

    Barry, remember that the magazine cover indicator ONLY holds true for “regular people” rags like Time or Newsweek.

  25. Nihilism says:

    Just when Kudlow Brings back Goldilocks…

    Bears Weep
    May 29, 2008; Lawrence Kudlow

    To recoin U.S. News blogger Jimmy Pethokoukis, “No Recession. No Bear Market. Bears Weep.”

    Today’s revised report on first-quarter GDP moved the number up to 0.9 percent at an annual rate versus a previous 0.6 percent. Year-over-year real GDP is 2.5 percent.

    Incidentally, brand new numbers on profits show a much stronger-than-expected gain. Profits are the mother’s milk of stocks and the economy. So this is very positive.
    Also noteworthy is a low 2.0 percent core inflation rate, with the headline rate coming in at 3.4 percent. Look for these numbers to rise as a consequence of the cheap dollar and the commodities boom in energy and elsewhere.

    However, markets are smarter than GDP reports. And stocks are up over 100 points today, continuing their gains of Tuesday and Wednesday.

    Even more significant, Treasury market rates are rising a lot, with the 10-year bond now all the way up to 4.11 percent. This is important because almost all the interest-rate gain comes from rising real rates, a signal of increased credit risk-taking and an end to the banking-crisis run for safety.

    Rising real rates also foreshadow a stronger economy in the future. And they are adding support to the beleaguered U.S. dollar. So gold is plummeting and oil prices are retreating. This is exactly what goldilocks wants to see.

    Instead of safe-harboring in commodities, investors are going back to stocks because the fundamental U.S. economic picture and the banking-credit picture are getting better.

    The combination of a rise in rates, a stabilizing dollar, and plunging commodities could be a tectonic sea change — and a very positive one at that.

    Think of it this way: Investors now seem to want to loan money to job-creating businesses rather than Uncle Sam. Bravo for that.

    Meanwhile, money-market futures are predicting Fed rate hikes next year and maybe beginning later this year. That would lend strength to the dollar. And that in turn would contain inflation.

    Anticipating this, the plunge in gold could well be a leading indicator of a big decline in oil. Now if only Treasury man Paulson would call for an appreciating dollar.

    Of course, hovering over this good news is the threat of a three-house Democratic sweep in November. The mere thought of Barack Obama, Harry Reid, and Nancy Pelosi all at once is a potential suppressant for the economy’s improving animal spirits. But let’s cross that bridge when we get to it.

  26. Andy Tabbo says:

    If you’re looking to exit some length, your opportunity is coming up. Oil marekts close at 2.30 est. The stock market always gets temporary amnesia at that time and then goes bid/consolidates for a little while, so you’ll get a bounce at the bottom of the hour.

    Good Luck.

    - AT

  27. dukeb says:

    I think it’s a safe bet there was a different crew at the Econ in 1999. Covers are nothing but the business decisions-of-the-moment of the few people behind the cover. The Economist is *NOT* a single, soulful entity unto itself. Who are the exact people behind the covers…even just for the Econ, does anybody here know??? What color socks are they wearing today? Or are they wearing flip-flops? What do their parents, wives, husbands, lovers, neighbors, pets, kids think about them? Are any of them in therapy? On meds? Do any of them clip coupons? Do they smell? Drink too much? Overeat? Are they in debt? Are they pretty people or ugly people or a mix? Shouldn’t you at least be able to answer these questions before putting any stock in what *THEY* decide to spin???

  28. Harry van B euningen says:

    “They need to do something next week or global markets will crash.”

    Why must something be done when markets may crash to the downside, but nothing be done, when markets accelerate to the upside?

    Surely the market is what it is.

  29. Where is the non-geologist Michelle Caruso Cabrera (who called for a top in oil last week) when you need her?

  30. cinefoz says:

    The most striking aspect of the punditry explaining oil prices is that, if you listen carefully, absolutely none appear to understand the entire market. Some understand the traditional ‘buy a contract and risk delivery’ model. Few offer insight into the ICE exchange or index futures. There are undoubtedly other ways trade energy commodities, but nothing is proffered from the talking heads.

    Most rely on tired old peak oil logic because it’s the easiest way to sound smart without offering any intelligence. Government or exchange officials are generally non responsive, although they use a lot of words in the process. I suspect those who do know how to game the system (probably legally due to overseas markets and uncertain regulation) consider their schemes to be ‘trade secrets’ and are not open for discussion.

    I hope the congressional investigations put together a full picture so the entire mechanism becomes known to all who are interested. Then laws need to be passed to allow supply and demand to take over again.

    Someday oil will actually be worth the current amounts. Just not today, I believe.

    If anyone can point to the entire system of ways to trade oil, then offer it up for analysis. I want to know the soft points that are open to manipulation if approached properly. It appears the trigger to set the wheels in motion are the memos from investment houses that give price direction and imply a call to action.

    Incidentally, this is called ‘conscious parallelism’. It is said to be hard to prove when price fixing is suspected. Perhaps the incoming Obama Administration will take aggressive action just to make an example of anyone it can get it’s hands on.

  31. me says:

    No one mentions the meeting between two disgraced, desperate leaders, Bush and Olmert. And all this talk or Bush or Israel striking Iran before November, coming from Israeli government officials.

    And then there is the big pipeline in China that is about to break due to the earthquake.

    I do like how BB talked up the buck and down oil there. Pretty impressive.

  32. Eric Davis says:

    this reminds me of the Dow in September.

    What were the last commodities that went limit up? wheat? Rice….

    anyone know what happened to those commodities after that?

    I was suspecting that oil was still in a secular bull, but this points to a nice “Come to Jesus” for it.

    It is nice the the Fed gave the IBanks some free money to speculate in commodities.

    But maybe we will have to force the countries with price controls to pay up dearly, first.

    The demand spike is for the Olympics, and isn’t sustainable, and even my dip-shit brother purchased a motorcycle to save gas, and he drives 4 miles to work.

    Demand destruction is already here, and a 2 day .30 spike in gas will drive those last nails.

    Some of the Regionals are threatening 12% dividends today, are they really going to cut them all in half? to 6%?

  33. DL says:

    Not to worry…

    Somewhere north of $150, Bernanke will take notice.

  34. Peter says:

    There was a lot of saber rattling this week from Israel about attacking Iran before the end of the year. With Obama being the official nominee instead of Hillary, the Israeli hardliners are seeing their window to do something about a nuclear Iran closing quickly. The Bush administration seems eager or at least supportive of this action, and this would also help the Republican’s chances in November. Wouldn’t any disruption in Iranian supply more than compensate for any reduction in demand. Thoughts? I hadn’t seen any mention of this anywhere in the thread.

  35. Hey cinefoz, have you even read the details on peak oil? The proof in the pudding is if the global oil supply ever approaches 90 mbpd. No matter what one thinks of the geological arguments, if we don’t ever get much past 85 mbpd, it’s still peak oil.

    You didn’t exactly “offer any intelligence” in your post.

  36. John says:

    I love all these confident predictions it’s all speculation and the bubble’s going to pop. Of course there’s speculation there alway is in any commodity market. But what’s the extent of it. What’s the froth, ten bucks, fifteen, twenty max. Oils trading in a range of probably 120-150. So even if speculative activity abates it’s not going thru the floor. We’re likely living a $125 a barrel world for the foreseeable future.

  37. dwkunkel says:

    Some thought provoking comments on peak oil from David Galland via prudentbear.com Turning Off the Taps

  38. RichardN says:

    Who actually believes an attack on Iran would help the Republicans in November? No matter what the true factor is, people will blame the government for soaring gas prices (coincidentally, this time around they would be right). The lost votes from $138 oil and an economy in deep recession can’t be made up for anywhere else no matter what arguments and lies are used to justify an attack on Iran. Common sense says the government should be doing all it can to manipulate prices down if it wants to stand a chance in November, yet they appear to be doing the opposite. Perhaps they view their chances as so slim that they might as well fill their pockets as much they can before they leave. Truly sad.

  39. cinefoz says:

    peter said:

    There was a lot of saber rattling this week from Israel about attacking Iran before the end of the year.

    reply: I have half-wondered for several years what special legacy GWB would leave to make sure his vision of the world comes to pass. Encouraging an Israeli attack on Iran just for grins before his departure would be the icing on the cake. His image of a middle eastern transformation in progress would be complete. These would be the continued actions of a functional, but insane, man.

    And oil would be unaffordable. Since most people are now able to see through GWB, I don’t believe McCain would benefit since he is viewed by many as GWB’s philosophical flunky.

  40. fatbear says:

    Lost somewhere in the hoopla is the fact that we’re out of contango and back to backwardation

    Front month went up ~$10 to $138.54

    Longest month went up ~$5 to $132.88 (Dec 2015)
    (Note: No NYMEX 2016 traded today)

    Earlier in the week it was pure contango out as far as the eye could see….

  41. photoalchemy says:

    Magazine covers are accurate only when rolling stone uses australian 90′s band midnight oil puns in a cover article about oil.
    or if Time does a cover story on whatever topic has been the hot topic over the last few years of water cooler cconversation at the salon, but as if its a new concept.

    Inverse (or reverse?) the economist gets the Oprah wedding photos. Real barrels of oil for sale in a Neiman Marcus Christmas Book? Nope, not even close.

    … c’mon, you know how long the Black Swan takes to cook! The more talked or blogged about, the longer it takes. This is one of those things where looking at something changes it. Put up your feet & read a magazine cover to cover.

    (2019 bottom)

  42. photoalchemy says:

    This is one of those things where looking at something DOESN’T change it.
    (ironic lil slip of the post)

  43. Steve Barry says:

    Nice volume on QQQQ today…Bwahahahaha.

  44. VennData says:

    Ever notice how Ahmadinejad starts shouting whenever oil prices start to decline? He’s running a protection racket.

  45. Francois says:

    There is no way to tell when the peak and the inevitable correction will occur. Markets are too different of what they were on previous occasions.

    Lots of US traders work around NYMEX restrictions by trading on the London ICE and soon (if not now) on Dubai new Comm exchange.

    These unrestricted huge flows of money; is it a good thing, or a bad thing?

    I don’t know the answer to that. But one thing is sure; it is bound to magnify the end result of any speculative fever in commodities.

  46. cinefoz says:

    Off topic, but something nice to share:

    I just saved a hundred bucks or more from my home heating and air conditioning bill. I can’t provide the exact amount. I just noticed it in my heat bill and expect to see it in my air conditioning. Here’s how. It’s brain dead simple.

    I stopped using high efficiency furnace filters and started using the cheap fiberglass ones. Besides the obvious annual savings there of about $60, I noticed the blower was quieter and ran less time. Why? The high efficiency filters force the blower to work longer to put enough air through to do the required work. In the process, more gas is burned. The cheap fiberglass ones provide minimal restriction to the air flow.

    I have noticed no difference in the house dust or with any allergies. Just a lower heat bill.

    You’re welcome.

  47. michael schumacher says:

    francois-

    It is bad for us however the loophole exists so I’m not surprised to see it happening. I would if I could…..

    OTC trading volumes for Oil exploded as soon as the questions about it (via our “officials”) were raised here.

    Ciao
    MS

  48. Francois says:

    After a rout like it seems we’ll have on the stock exchanges, (DJIA -3.13%; NASDAQ -2.96%) I wonder what kind of weekend the heads of the CFTC will have. (*evil grin*)

    The pressure from Congress must be painful to bear for these people.

    Of course, there’s not much Congress can do (translate: no quick fix this time around…suckers!) about it, except, of course, put their fiscal and budgetary house in order.

    Only under extreme political duress will these clowns realize that they have to do quite a lot of things right for the common good. They KNOW what should be done, but hey! go tell that to their donors in the special interests groups.

  49. Francois says:

    “It is bad for us however the loophole exists so I’m not surprised to see it happening. I would if I could….”

    Well…this raises a excellent question: How does one get into the action on the ICE? Need 10 billion in net assets as starter? One’s got some, ahem, connexions?

    Anyone knows? MS?

  50. Bob A says:

    it’s an Enron world

  51. DonKei says:

    I think it’s “dipshit”, not “dip-shit”. Sorta rolls off your mental tongue better when you read it.

    But you could ask any of my sisters–I, too, am a dipshit brother that last year bought a motorcycle.

    Whew, too much excitement for one week.

    It seems w/ the oil and the stock markets, the world is finally coming around to the notion that the Fed has painted itself in a corner, and all the printing presses in the world won’t change the pain.

    Throw in the reality that 2008 will have neither a Bush nor a Clinton on the ticket, and it seems a Chinese curse has descended upon the land.

    This looks to be interesting.

  52. michael schumacher says:

    Don’t know Francois as I’ve never investigated it. At this point the risk vs. potential reward is a little skewed in favor of “them”……

    USO is a joke so I’ve not gone much further than that.

    Good question though….

    Ciao
    MS

  53. shoeless says:

    Smells like the Fed has [finally] realized the only way they are going to lower inflation [crude at new high of 137.42] is to accept a recession, perhaps a serious one, as the lesser of two evils (namely a recession and lower inflation now…rather than more inflation and a depression later]. This would explain all the recent rhetoric from Bernanke [and others such as Bullard and Poole today]. And it’s the wisest course. They can’t ONLY whine about aweak dollar and high oil prices any longer. They need to act,if only
    ending their monetary and verbal support of the risk asset markets and use any existing or accumulated monetary “ammunition” to build up these markets after the recession is allowed to take hold. In short, the Fed is going to have to start acting more like the ECB in focusing on controlling inflation rather than supporting growth and employment which is futile under current conditions anyway. There has been no economic growth traction from their efforts because folks have finally grasped (probably without realizing it fully) that liquidity is not a substitute for solvency and economic viability.

  54. Mich(^IXIC1881) says:

    Since I am one of those who don’t quite see the value of magazine cover indicators, I am fine with the bet.

    If we see a price above 135 in the next 12 months, will you lay rest to the magazine indicator stuff on this blog?

    Posted by: Mich(^IXIC1881) | Jun 3, 2008 7:23:36 PM

    ———–

    So what did I win Barry?

  55. rickrude says:

    don’t worry Barry, I did not sell my oil stocks because of your dumb indicator.
    Peak oil lives on.

  56. rickrude says:

    Days like this are actually very good because they prove without a doubt that the rise we’ve had has absolutely nothing to do with supply and demand. Now it’s up to those who can stop this to actually stop it. It will most definitely continue its march onwards to 150 and beyond if nothing is done.

    Posted by: RichardN | Jun 6, 2008 1:29:28 PM
    >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
    Richard, mortgage your house and job and
    short the contracts, don’t be a hypocrite,
    you can do something. You just another talking head with nothing to back up your mouth.

  57. bsneath says:

    Two events today:

    1) Teenagers need gas money and are looking for jobs.

    2) The Mother of All Short Squeezes in the oil futures.

    I bet Morgan Stanley is laughing all the way to the….. oh never mind.

  58. rickpolite says:

    Please excuse my potty-mouthed brother.

    He took a hard hit to the noggin at age 13 and his social skills have failed to develop any further since.

  59. PeterR says:

    Beware the Buffett “Hair Trigger” quote under the first chart.

    ALL tradable items could get pretty dicey here IMO including oil, commodities, bonds, etc…

    Have a good weekend.

    Peter

  60. rickrude says:

    bunch of whiners here, you guys don’t have
    any gonads to make any bets long or short.
    Go ahead, complain about your miserable fate in life as if someone else is to blame for
    you not making wise investment/speculation.

    Tell the government to clamp down on oil companies.

  61. pft says:

    “Now it’s up to those who can stop this to actually stop it”

    Unfortunately, they are the same people who are doing it or allowing it to happen.

    Now, when they shove the Climate Security Act home, this year or next, it won’t matter what the price of oil will be, all energy will be even more expensive and whats left of the “real” economy will be toast.

    Killing you softly.

  62. Anon says:

    Time to nationalize the industry in the name of national security?

  63. Alfred says:

    Today’s action in the pits should once and for all silence those who still argue that speculation has nothing got to do with it. There was rumor that a hurricane cat6 was hitting the Gulf, maybe that’s behind today’s action.

  64. RN says:

    I nominate KenL:

    “Hang in there BR. The magazine indicator is still valid, the timing just isn’t perfect.”

    for the thread’s stupidest commenter.

    THE WHOLE POINT Barry’s trying to make with the indicator is its timing!!

  65. RN says:

    @ Mich(^IXIC1881) -

    Your ‘I bet there’ll be less snow on the ground every day after a snowfall hits the front page’ comment on the last thread about this goofball magazine indicator was hilarious. :)

  66. Robert- says:

    Oil keeps going up like this… I’ll bet the Fed’s are going to adjust their seasonally adjusted numbers again so adjusted inflation is still in check. They have to… can’t give them Federal employees more than a 3%/yr raise.

  67. The Denial Trinity:

    Recession Deniers + Global Warming Deniers + Peak Oil Deniers.

  68. wunsacon says:

    >> THE WHOLE POINT Barry’s trying to make with the indicator is its timing!!

    Um, the timing isn’t supposed to be “to the day”. Maybe within 6 months after.

    If oil rises another 10% and then drops 40%, then this cover was a “good” contrary indicator.

    …I’m not commenting on the value of the cover indicator. I’m just defending KenL by explaining the timing isn’t supposed to be “that close”.

  69. wunsacon says:

    I’m with rickrude here…

    Whoever stretched to buy a big house and SUV instead of buying some oil stocks chose poorly — and contributed to the problem.

    Whoever supported war in polls instead of diplomacy contributed to the problem.

    Whoever supported politicians with unsustainable growth policies for the past 30 years contributed to the problem.

    Want to blame “speculators” (investors)? Don’t. Complainers should start by looking in the mirror or looking at their parents.

  70. wunsacon says:

    RichardN, it has a *lot* to do with supply and demand: the unemployment rate may tickle the FED to cut interest rates *yet again*. “More credit” for the same amount of oil means higher prices.

    Are you buying Treasuries with negative real interest rates? If your answer is “no”, then don’t expect anyone else around the world to do so either. If I’m China or India, I’m going to use all my USD to buy energy futures — not worthless financial IOU’s.

  71. Wunsacon,

    Well said. If the very Earth beneath are feet wuz just spurtin’ with oil then oil going from $20 to $100 a barrel from 2000 to 2008 would sure get those drill bits heated. Aint’ hapnin. If oil was a truly elastic commodity (like corn to feed Iowa) we would have seen the adjustments long ago. Certainly since 1Q of 2007. Not hapnin. Where is all this pent up erl ?

  72. Jim Haygood says:

    “the unemployment rate may tickle the FED to cut interest rates *yet again*.”

    Wunsacon’s remark leads an interesting hypothetical — if the U-rate goes exponential to 7% or 8%, would Ben slash again?

    My answer is, hell yes. This is a political decision. Unemployment trumps stable prices. Indeed, at this point in the housing depression, people WANT inflation (at least the “good kind,” asset inflation) to make their houses appreciate. Don’t we? As a friend of mine quipped, “I’m voting Democrat cuz they’ll make my house go up faster.”

    Zimbenwe may be the first Fed chairman to introduce the ZIRP (Zero Interest Rate Policy) to America. Fly on and fly high, Airman Ben!

  73. tom a taxpayer says:

    What is worse than very high oil prices? Not being able to get oil at any price. Or, more precisely, when world oil supply does not meet world oil demand, some portion of the world oil market will not get oil. Period. At that point it does not matter what the oil price is. Some users of oil will not get oil. Period.

    That is when the real pain begins. What country will allow its people and economy to get the short end of the stick….United States, China, India, Japan? What we face now is a bidding war for oil. Let’s hope it can remain a bidding war, and not a real war.

    Up to this point, the hysteria over oil has focused on the effect of high oil price. However, we are moving toward an even worse situation, where some people and some businesses will simply not be able to purchase oil because the supply does not meet the demand. The point at which higher oil prices does not bring more oil supply to the market will be the tipping point. Maybe we are at this tipping point now, If not, we seem to be fast approaching it.

    In today’s world of expensive replacement oil, oil supply can not be increased by simply turning a faucet. You have to build a new billion $ offshore faucet, waiting ten years before oil flows from the faucet. In the short run, there is no practical substitute for oil (ethanol is an example of an impractical substitute that does more harm than good by raising food prices).

    There is no oil crisis so severe that it can not be made excruciatingly more painful by government actions to solve the oil crisis. Exhibit 1 – the ethanol fiasco.

    My greatest fear is that next week the President and Congress will outdo each other with more boondoggle proposals to solve the oil crisis. You think the speculators are putting you in pain. Wait til the President and Congress show you what real pain is.

  74. tom a taxpayer says:

    If oil price is a bubble, the speculators leave when the bubble bursts. But the laws (like the ethanol fiasco) enacted by the President and Congress remain and inflict pain on consumers, taxpayers, and the economy long after the bubble bursts.

  75. Mich(^IXIC1881) says:

    Posted by: RN | Jun 6, 2008 9:25:01 PM
    Thanks RN, but I still didn’t hear from Barry about what I won for taking the bet… If not a “ok, I am going to stop with the mag indicator for a while”, at least a “I will give you a free FusionIQ subscription for a year”

    tsk, tsk, tsk.

  76. Mad props and a quick mea culpa

    As noted, its not infallible — but there have been too many instances where its been a money maker to ignore . . .

  77. Mich(^IXIC1881) says:

    Wow, I am truly impressed that Barry took his time to send an email to me…It is these kind of details that separates “good enough” from “great” in business or life.

  78. RN says:

    Mich I agree with you yet again…

  79. michange says:

    All this is not peak oil, this is just dollar bottom out.

    Thanks to ponzi CDSs, U.S. trade deficit and debt are just coming to maturity.

    If I were the Chinese/ Indian/ Brazilian/ Russian, I would convert all my dollars into oil, waiting for the credit crunch and the recession to enact the much awaited bankrupcity of the U.S.

    If there should be a contratrian indicator to look for, I’d bet on all those recent (and so lame) strong dollar allegations from the over-rotten US talking heads.

    I bet on a black monday next week, lead by the credit crunch. Have a look at this graph :
    http://tinyurl.com/5h3puk

  80. Brian Powers says:

    Maybe The Economist is just a good magazine. I feel it has even improved over the last few years.

    I certainly would not equate their cover as an indicator to something poppy like Time.

  81. Brian Powers says:

    Of course, I meant as a contrarian indicator.