When tech stocks were rising fast and drawing in numerous active but inexperienced investors, two problems arose. First, most had experience only with rising stocks so thought of each leveling off or dip as the market "catching its breath" for the next climb. As new investors experienced gains and experimented with leverage, they realized how much more they could have made had they leveraged earlier investments. And seeing their portfolio gained most with tech stocks, they poured even more into stocks in order to make even more.

For most though, it was much less clear how to "invest" in falling stocks, or how to leverage such bets. To what extent did this asymmetry about speculation contribute to the unfortunate final year or so of the dot.com boom? This is not so much a question of optimists vs pessimists, but one of rates of growth. Even optimists prefer stock prices not rise faster than reasonable present values of future returns. So tech stocks finally crashed wiping out many who just wanted to invest in the future and hadn't thought market valuations could be so far off (Sun Microsystems stock dropping 90%, for example).

Next came the housing crunch. Baby-boomers burned by the dot.com crash turned to "safer" investments in housing. Tens or hundreds of thousands purchased larger homes or a second or third home, using modest down payments for easy leverage. I thought housing prices were way high when I moved to Seattle in 2003, so I chose to rent. But prices went way higher, and anyone then speculating in housing doubled and tripled their money. But it is much easier to buy five or ten houses as investments or speculation than it is to sell five or ten houses on speculation. So again the asymmetry pushed prices up. People who felt housing prices were too high could sell houses they owned, but could not easily sell houses they did not own.

Now, as housing prices stagnate and drop, investors and speculators will lose much, though homeowners will lose only the imaginary valuations of the last few years. Those burned but not educated by tech stocks and housing, are looking for another "hot" investment. How many have turned to energy stocks and oil?

Again, for new investors, it seems like oil prices can only go up, and stabilize just to catch their breath on the inexorable march to 100 dollars a barrel and beyond. Environmental investors are on board too, and perhaps think of their oil and energy bets as helping "save the Earth" as well as sticking it to SUV owners (not to mention the hope of making big bucks for themselves, of which they silently pledge to donate a portion to eco-charities).

Many of course expect oil prices to fall, especially at some future point when the U.S. government stops threatening to bomb or invade major oil-producing countries. But still, the oil skeptics are overwhelmed by the legions of newby investor-speculators betting on higher and higher oil prices.

Apart from the media misinformation on oil scarcity and peak oil, is there an asymmetry with investment tools for oil that tilts oil investments toward prices increases, as seemed to be the case with housing and tech stocks? Or is it just as easy for the average investor to bet on oil prices falling as it is on rising prices?


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