Monday, May 26, 2008

High oil price a bubble, says Soros

It does feel good when your ideas/thoughts are supported by a billionaire. If you recall, in an earlier post I mentioned that the many of the BS reasons being given by stock analysts for the soaring Oil/Gas prices were unpalatable - Growth in China for example. No, China's growth and need for gas just can't be just debunked and surely there is some truth to many other facts but Greed seems to be the biggest reason for the insane gas/oil prices. This speculation greed is what the analysts conveniently forget to mention - of course, I didn't/don't expect them to point a finger at themselves but hey when not a single stock analysts mentions that greedy constituents of stock markets are driving the fuel prices, that bothers me.

Soros lays it out open, brutally. In brief, he says that Oil prices are mainly going up so quick because they are on a speculation ride.

To me what that means is that in next few months when oil prices do slide down, it will burn those investors who are getting on the oil bandwagon now or plan to buy oil shares, in the coming days. Here's the full article;

May 26 (Bloomberg) -- George Soros says speculators are a key cause of the sharp rise in the price of crude oil, the Daily Telegraph reported, citing an interview with the billionaire investor.

The Telegraph said Soros maintained that while the soaring oil price, which hit a record $135 a barrel last week, can be linked to the weak dollar, declining Middle East supply and rising demand by China, speculators have had a strong effect on the crude oil market.

The price increase has a ``parabolic shape,'' Soros said, noting that such a shape is ``characteristic of bubbles,'' according to the newspaper.

The comments are significant, not only because Mr Soros is the world's most prominent hedge fund investor but also because many experts have claimed speculation is only a minor factor affecting crude prices.

The oil bubble will not burst until the U.S. and Britain are both in recession, at which time oil prices may drop dramatically, the Telegraph cited Soros as saying.

Mr Soros warns Britain is facing its worst economic storm in living memory, dwarfing those of the 1970s and early 1990s, with a housing slump and serious recession.

Mr Soros warns Britain is facing its worst economic storm in living memory, dwarfing those of the 1970s and early 1990s, with a housing slump and serious recession.

He said: "The dislocations will be greater [than in the 1970s] because you also have the implications of the house price decline, which you didn't have in the 1970s."

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