Chris B

Oil and Commodities Pricing: Fundamentals, Bubble or Manipulation?

Another reason I've been double-short oil since 7/18 (DTO). Supply and demand is exactly what it was when oil was $100 a few short months ago, maybe less on the demand side due to the recessions around the world.

I blame "momentum" investors more so than mafia-esque figures. If enough money bets on what is going up, it will go up, until the bubble bursts (much like when a ponzi scheme ends). This happened with tech stocks, housing, and natural resources - all in the last dozen years. The smartest of these momentum traders took profits off the table regularly and thus still came out OK when the bust came and wiped out their most recent investments. They lived to play the game another day, unfortunately.

The trick is to figure out what's the next bubble they will inflate. In all cases, an expectation develops that upward momentum is inevitable due to some reason. For tech, it was rapid advances and earnings growth. For housing, it was low interest rates and perceived shortages. For resources, it was inevitable inflation, peak oil, Chindia, etc. What's next?

Asian stocks (again)?
Renewable energy?
Infrastructure?
Latin America?
Forex (again)?
Defense?
Bonds?