Feigning weakness when there is strength. Deception thy name is Trading.

Hopefuls who always sermonize what the markets should do have started doting endless blogs on how a sustainable rally in equities requires crude to be low. Such Pontiffs fail to realize the correlation, even if some will call it spurious wrongly, between crude and equities. Not only the value of crude is measured in Dollars as much as equities are weighed against dollars and this multi-collinearity has a hidden layer of a variable switch of Risk-on /Risk-off. Often crude responds ahead of equities on the risk-on/off switch.

The same way the yields on apparently safer financial contracts goes down when businesses are unlikely to afford a higher cost of capital, the moves in crude too are of a similar nature. The cost of energy is the cost of doing business. But then scholars must be those who will theorise without testing if the horse pulls the cart or cart is pushing the horse.

Does anyone else see Sun Tzu and his able successors active in acquiring Oil Assets & crude contracts now?


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