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Tuesday, September 16, 2008

The line in the desert sand on Oil is $86!

Did anyone watch the 2016 futures contract on oil nudge up yesterday while oil got hit? The experts said oil wasn't going below $100. I begged to differ. But the marginal cost of finding oil has gone up. And now you have to start taking some positions in oil!

The Shanghai market finally breached 2,000 and the Russian market was clocked 11%.

It's time to create some wealth in this world again.

At $122 oil, Saudi Arabia was spending 70% of their oil revenue, and putting the balance in their sovereign funds. And that was the average price of oil for the second quarter.

What's 70% of that?

Why do you think OPEC said the floor of oil is 85? 86 and 88 are revered numbers among Arabic and Asian investors. So with $5 downside in oil from here, you have to start getting busy on the oil side again.

How tough is that?

Now concurrently with oil, we have a Fed that didn't cut rates today, even though it was predicted in the Fed futures market. So we'll have the shills talking up the dollar on this news.

They will be wrong.

I think the dollar is now going to start weakening. What is oil denominated in? If oil goes up, and we pay for it in dollars, doesn't that mean more dollars are circulating? Or do you think the fall in oil, had nothing to do with the strength of the dollar?

But that explanation is just too simple for Wall Street.

Wall Street traders love finding reasons for anything. So use that as a reason, but look at a couple of charts so you'll have some conviction behind it.

And eventually, people will get over the giddiness of these government bailouts, and start questioning our currency again.

Lazarus is back! And so is the sell the dollar and buy oil trade!

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