An Oil Bubble?
What role do analysts play in driving a speculative bubble and how do you determine a true bubble from market fundamentals?
Both of these questions came to my mind as I read this morning's New York Times and their coverage ("An Oracle of Oil Predicts $200-a-Barrel Crude") of Goldman-Sachs' analyst Arjun Murti and his prediction of oil at $200 a barrel.
Mr. Murti has a successful track record in predicting oil prices going back to 2004 so many traders are likely to pay serious attention to his latest projections as this quote from NYT suggests:
""Even if you disagree with their views, the problem is that Goldman does carry so much credibility," said Nauman Barakat, senior vice president for global energy futures at Macquarie Futures USA. "There are a lot of traders who are going to buy based on their reports."
I can't help thinking that we're seeing the precursor of another Black Swan event – if that's true, two more questions come to mind… who's going to lose their shirts this time and will it be another massive hit to the financial markets? I can't see the Fed stepping in to bail out the oil speculators if indeed this is a bubble!