Monday, June 1, 2009

Bubble, Bubble Toil and Trouble

I spent the past week finishing the book I am writing, it is a novel about a conspiracy to raise oil prices complete with murder, mayhem and the obligatory sex scene. Conspiracies are a popular subject in financial markets, not without cause. In the oil market price fixing and collusion is as rampant today as it was when the US "Seven Sisters' oil majors dominated the world's markets. (It is just less obvious.)
But usually the reasons behind a market move are pretty simple: people buy when the market is going up and they sell when it is going down. It is human nature. The next best thing is whatever stock or asset class is rising quickly. This is what causes asset class 'bubbles'. There is talk that regulators are trying to figure out a way to stop bubbles from happening. They might as well use donuts to try and to stop flood waters from rising over a river bank. People like bubbles. They like identifying something that might make them money, then they jump into it head first and hold on until the bubble pops. That is what happened with the dot coms and then housing. The next bubble is what will help to pull the world out of the recession. And you can be certain that if the investment banks put their minds to it (and I am certain that they have already) they will create the next new bubble and make oodles of money on it.

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