Sunday, April 27, 2008

My Contra Indicators are in the Red Zone Again

One of my best contra-indicators (a contra indicator is an indicator that is either usually wrong or whose presence indicates immanent disaster in a particular market) just made me think that a run to over $150 per barrel for oil is likely by year end.

My contra-indicator, actually there are 2 of them, are a couple of Wall Street salesmen.  They don't know each other.  I am the "first degree of separation" for them.  I had a short conversation with one several weeks ago and the other last week - and here comes the contra indicator:

They both said they didn't think Oil would go to $150 per barrel.  Not this year, not 2009, not 2010.

I asked them how they came to that conclusion.  Here comes the good part:

"I, I, I... I just don't THINK so.  I just don't THINK so" (emphasis added)

Now, I know for a medical fact that both of these individuals are congenitally incapable of any form of abstract thought, and have been since the day they passed their test for a securities license.  Self made millionaires both, But not because they did any original research.

These guys have been wrong on oil for several years now, so I know I should be concerned that eventually, like a broken clock, they will be on the right side of the trade.  There is no perfect indicator, contra or otherwise.

Still, I actually DO think.  and...

for the December '08 WTI contract:

50% probability the contract trades for $150 to $200 before expiration;

30% probability the contract trades trades $100 to $150 before expiration;

20% probability the contract trades under $100 before expiration

And because I will continue to, you know, actually think... I reserve the right to change my mind on a moment's notice.

Yours for a better world,

Mentatt (at) yahoo (dot) com

3 comments:

Anonymous said...

Do your contra-indicators watch a lot of TV? It sure sounds like it.... ;-)

Anonymous said...

Yipee! Me got me some of dat option at $90. I will be buying more longer expiration crude just in case.

These visions of out sized cap gains are nice, but then the reality sets in. People are already hungry, and this will cause more of the same, perhaps much more. The airlines are already shutting down. And here I am going to be stranded far from what is left of my family. Although it is paradise it is far from everywhere at the end of a very long supply chain that because it is serving a small population will probably be rather tenuous. I hope the natives don't resurrect their cannibalistic cultural habits.

Just call me a "Long Pig" Chuck H.

BTW, in my previous post I wasn't calling you a middle aged man Greg. I meant the blog was tailored for the middle aged men with money. I wouldn't throw stones - living in glass house that I am.

Greg T. Jeffers said...

Chuck:

LOL, I was not offended in the least! I am what I am, and thrilled to have lived this long, and hope I live long enough so that I look like an old leather suitcase that has been around the world a couple of times.

Frankly, I am a true, free market, libertarian capitalist (not like these bloody wimp hypocrite CEO's that suddenly become very Socialist when their fiefdom is about to blow up). I don't count myself amongst the "doomer socialists", either. Hardworking, frugal, intelligent folks are going to pop out the other side of this thing... and I feell they need to be truthfuly informed.

Also, I think the next 30 years will be a most interesting time to be alive, so I hope to live long and see it. I wish the same for you... "Live long and prosper!"