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
Posted by The Short Story Man at 9:56 AM