Oil makes a new low as markets continue lower
Eurozone: French Industrial Production slows in October
Turkey: Growth slowed more than expected in Q3
Everyone is a genius in a flat market, but when a bubble pops, it turns out they were all wrong. Five months ago, virtually everyone was forecasting oil around $100 when oil was around $100. Now, everyone is forecasting oil at $60 with oil prices at $60.
The truth is that no one knows. Don’t believe anyone or anything. Fortunes are made from going against the grain and fighting the conventional wisdom.
Here are two things people believe that might turn out to be dead wrong:
1. That oil will bottom somewhere in the $40-60 range.
Why not lower? The US is producing nearly 10 million barrels per day of oil in an extraordinary boom. Those technologies can be exported to tight oil formations around the world. Other technologies are making it cheaper to extract oil from tar-sands and elsewhere. At the same time, alternatives/conservation is growing. The long term oil average is around $20, why not?
2. What would an oil bust mean?
This is inspired by Bank of Canada Governor Stephen Poloz, who sounded downright blazé about the risk to the economy from oil today. He dismissed the risks to banking and the financial system outright. I was around when oil was $9 a barrel and it presaged the Russian default of 1998.
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