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Energy Stock Trader: Friday Outlook

So Mr Zman - shall we soon see the free market price - being the physical willing buyer willing seller fundamental value - of many commodities as the speculation value disappears for awhile? No free money = no speculation.

Are you going to take a stab at how the futures market is going to react ? Will all the speculators just close out their positions and go on holiday, or sit and stare at their screens and wait ? If so, what event aside from printing billions of digital money can hold back the fear, and then for how long ?

My hypothesis is that we do not just have a housing bubble - we have "anything that had a positive cash flow that looked like an asset "bubble, driven by cheap money since 2002. That is an awfull lot of money to unwind with no real value fundamentals underpinning it. It has been fun while it lasted, but asset inflation is a tough play to unwind - ask the Japanese after years of stagflation. Everyone has felt wealthy and raided the house mortgage account for a free ride to make even more, be it another house, a new car, more equities etc.

Even if we see valuations going from mark to model to mark to market, the burn on the market will do its own damage on liquidity, be it personal or company, and all the extra money being pumped into the system can only bring on inflation, but now in a low growth environment.

My bet - crude will be back to the $50/bbl as Opec blinks at the thought of a demand side meltdown - even if a few nutters like Chavez try to turn off the tap - they cannot - they will need the cash like everyone else to keep going !!!

We all better hope the Chinese and Indians do not blink - and carry on consuming. If that slips it is game over, as this is one fundamental real physical growth that has underpinned the market this last few years. Question is how much has been driven by internal Asian market demand - and how much by the USA. I do not know, but I guess we are soon going to find out.