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Martin Tillier

Martin Tillier

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Oil Markets Ignore Warning Signs Of Looming Recession

When you write about financial markets as I do, being a profit of doom can be a good short-term strategy, and that short-term nature makes it an effective one in the modern ADHD world. A headline about an impending “collapse” or “crash” is, after all, much sexier than “We will probably go a bit higher over time because that is what has happened consistently over the last two hundred years or so…”, and a sexy headline draws clicks and eyeballs. Fear sells, but there are two reasons to avoid exploiting that.

First and foremost, it is irresponsible. The vast majority of investors are best served by riding out the market’s gyrations and, no matter how clear you might try to make it that your views are aimed at traders rather than long-term investors, some people will read a doom and gloom piece, sell everything and miss out on good gains. Second, if you do it all the time, it becomes counter-productive. You can only be wrong so many times before you become the boy crying wolf.

So, I hesitate before using the “R” word. “Recession” has a specific definition in economics, it means three months of negative GDP growth, but for most people it is just a term for really tough economic times. With the events of 2008/9 a decade away but still within memory, that is a scary thing. Still, the two markets that decades of dealing room experience taught me are the most reliable indicators of brewing trouble…

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  • Bill Simpson on March 24 2019 said:
    It will take another year, to 18 months, for the recession to begin in the US.
  • Mark Stable on March 25 2019 said:
    Its starting to look like that unexpected black swan event is right before our eyes - the crude oil traders and hedge fund speculators are going to end up crashing the entire market.

    They have inadvertently ended up betting against what they saw as the obvious trend of prices rising to over $75 a barrel on the back of Saudi tightening, a trade resolution, the economy picking up through Fed monetary easing again and stocks surging through more free money. Since the start of the year they have been pushing the market higher and higher, and created a more and more ridiculous noise through their paid analysts - such as many on this site - about Saudi, Iran, Venezuela, etc, as they have become more and more concerned that matters were not as they had bet.

    For three months oil has artificially levitated the markets through artificial trading among such players - no doubt at huge expense, to such extent now that the traders and hedge funds can no longer afford to lose. The vast quantities of gold futures and treasuries liquidated to support this has now pushed up the oil market and levitated other markets that ought to have been correcting. Eventually this will cause a crash much larger than there ought to have been had markets not been manipulated to such extremes.

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