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Thursday, July 3, 2008

Entry for July 03, 2008

I like to believe that some substantiation of an approaching meltdown of the oil market just came in the mail today. I have been advised to cash out all of my equities and put the money into oil futures. The unsolicited newsletter cites stories of people getting rich beyond their wildest dreams by playing commodities. It avowed the usual effervescent baloney, supplies are critically limited, demand will push prices forever upward, and I can anticipate nothing but enormous profits.

Was anyone around for the penny-stock bubble that popped over a couple of decades back? How about the wealth promised and lost during the Japanese stock market bubble? How about the delusions of grandeur spawned during the “dot com” bubble of a decade ago? Was there not also a bubble for heating oil and natural gas a few winters back? Whatever happened to the riches promised from “day trading?” Did we not just go through a real estate bubble, with promises of ever-increasing property values and easy money for all that wanted to play the game? All bubbles say the same thing; that this time things are different, and prices will never again go down.

Oil prices will waffle with market conditions, as do the prices of all commodities. Nothing goes up forever and nothing stays down forever. Greed and fear are driving much of the price of oil, and greed and fear are motivating many people, and sadly many corporations, to play games in very dangerous financial arenas. Pension funds and financial institutions are now betting on oil going up forever. These same players lost their asses playing with the exotic debt packages born of the real estate bubble. I must strenuously object when I see pension funds and banks acting foolishly.

For the individual, it is your right to put your money where you want, it is a free country. I hope you find riches and happiness beyond imagination. Just remember, when you hear that a friend of a friend got rich playing with fire, it is probably nothing but smoke. Those who are burned rarely brag about their hideous scars.

Is there a chance that this bubble may grow larger before it blows up? Absolutely, it will grow until nearly everyone believes that it will grow forever. This may take just days or it may take months; if we go to another war all bets will be subject to the rules of chaos. As soon as all fools are safely floating on the bubble, it will indeed burst. Many say there is one key strategy the bona fide experts use when a bubble has grown to the point of failure. The genuine experts quietly take their money out while the amateurs are feverishly putting their money in.

James A. Zachary Jr.

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