Thursday, November 15, 2007

Our Crude Oil Correction Call Cometh

A few weeks ago, I made the idiotic prediction that crude oil was about to pull back in a most violent fashion.

I think we were right, but early.

Tomorrow, some 30% of crude oil options will expire worthless... because they are owned by speculators and hedge funds betting on (or hedging against) $100 oil.

When these options expire, it will take the pressure off the crude oil markets. And a major price pullback will begin.

As the Wall Street Journal reports:

Wall Street's speculators, who contributed to oil's 49% rise since the beginning of the year, have shifted direction this week. Yesterday marked the expiration of a key deadline in the crude-oil options markets. As it became clear that oil wouldn't hit $100 a barrel by the deadline, a chain reaction of selling ensued as traders unwound bets pegged to the risk of $100 oil.

The pullback has already begun. We called it early. But then again,
you don't have to be a genius to call a massive reversal... You only have to be

And then you need the audacity to say I told you so when you are eventually right!

Not that we're doing that of course.

What Oil's Coming Correction Means for Us

What this could mean for our portfolio is some relief, as oil and stocks have traditionally moved inversely (although in recent years, this hasn't been the case). A nice winter rally would certainly help our battered portfolio.

As will our next upcoming recommendation... a cleantech firm poised to clean up in China.

More to come,


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