In the
June 23 edition of Barron's, the following title appeared: "Bye, Bubble? The Price of Oil May Be Peaking"
On June 26
th, the
title of
Floyd Norris's blog post in the NY Times was, "The Beginning of the End for High Oil Prices"
The U.S. market on Friday was teetering on the brink of bear market territory, having declined almost 20%
since the October high. Is the media so anxiously calling for oil prices to roll over so that stocks can stop going down? That may be part of it but I think the bigger reason is that this oil bubble is
the most unpopular bubble I can remember seeing. Nobody likes it and everyone is feeling it in the wallet.
In the Internet bubble of late last decade, most people
loved it. Stocks were trading at 100x
revenue and nobody cared except Fred Hickey nd Bill Fleckenstein. In the real estate
market frenzy of 2000 - 2005, homeowners were rejoicing everywhere, feeling wealthy and taking equity out of their homes with abandon.
With the most recent oil spike, the oil food chain, from oil-producing
countries to the oil companies themselves to oil speculators are wearing the black hats. The fact that reasonably intelligent people are pushing for a windfall profits tax on an industry with relatively low profit margins is a joke.
I saw an email the other day suggesting (jokingly) that we sell wheat to the Middle East at the same prices that they sell us oil.
Now Congress is
seriously considering banning institutional investors from trading oil, which is pathetic idea. They should ban ethanol instead.
How about we just use less oil?
