WD 40I have to admit I've never read Rolling Stone Magazine before. I read it for the first time today. I found the absence of political correctness very amusing and refreshing. I don't remember seeing the word "a-hole" used in a financial publication, especially in the name-calling type of way. Rolling Stone called John Thain of Merrill Lynch fame (who spent million dollars to decorate his office) and Cramer by that word. Latest issue has a lengthy article bashing Goldman Sachs ("The great american bubble machine") for its role in last six bubbles. I am far removed from Wall Street but it seems to me that all investment banks (and Wall Street in general) supplied the WD-40 on the wheels of bubble creation. Goldman was not a alone. It is not much worse than others with one notable exception — a lot of alums joined top positions in government — Rubin, Paulson, et. al…

From a practical perspective one factoid really made me think: oil went from $60 to $147 while supply increased and demand declined. Oil's rise was completely driven by speculators. This is important; here is why: nobody knows what the oil price should be. Thus oil producers/consumers/investors are comparing $60-$70 prices to $100-$150 prices and in comparison they appear cheap. But once you realize that $100-$150 prices were a fluke, a speculative aberration driven by pension funds "diversifying" into commodities, a one time phenomenon, suddenly $60-70 may not be cheap. In fact in the world where demand for oil is expected to drop, these oil prices may actually be expensive. Also, think what impact high oil prices had on other commodities.


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