34. OIL IS THE "NEW NASDAQ"
QUESTION: If oil production isn't peaking, then why are prices so high?
ANSWER: Speculators. The same people who pumped the NASDAQ to absurd levels during the dotcom bubble have migrated to the oil market.
Goldman Sachs is talking up the market, predicting an oil super spike of $105 a barrel -- much like the "New Era" bulls were pumping DOW 20,000 in the late 1990s:
Oil markets have entered a "super-spike'' period that could see 1970's-style price surges as high as $105 a barrel, investment bank Goldman Sachs said in a research report.Source
Meanwhile, they are hoarding oil:
Goldman Sachs recently bought 10m barrels of oil. A senior oil company executive said: "Even within this firm, the mechanics of the market are not widely understood. When oil prices go up, everyone talks about fundamentals and geopolitics, but the role of speculators and banks is now very significant."Source
Oil is the "new NASDAQ":
A large warehouse in Amsterdam may seem an unusual place to attract the City's top traders and hedge funds. But, in the past few months, Morgan Stanley has been accumulating warehouse space in the Netherlands to store its hottest new property — oil.
This and the tankers that have been hired by the investment bank illustrate just how important oil is now becoming in the City of London and Wall Street. Morgan Stanley may be among the most advanced of the new breed of oil speculators, but, over the past year, many banks and hedge funds have joined the “black gold rush”. With the stock market proving lacklustre, the oil market has been a godsend for the banks,which describe it as the "new Nasdaq" (same source as above)
For more on this phenomenon, see #12.