Rational Advisor

So, who is keeping the analysts accountable?

On March 17, Goldman Sachs analyst Arjun Murti put himself and his firm on the front page of financial papers around the world by forecasting oil prices would hit U.S. $200/barrel.

Yep, that venerable firm came out with the target price of $200 a barrel, and at that time it l;oked like as if they could sway the public opinion to get it. They were creating the hype, because guess who their best clients were - hedge funds and speculators. Those guys and gals that spend a lot of money on commissions to the brokers. So what would the brokerage firm say “Oil is going higher”, meaning Buy more. And the financial papers love chasinhg and fueling crazy stories, pumped it up

He was the first of many to make this call and in his defense oil prices are higher today than when he made his prediction and he didn’t stale-date his forecast, so oil might still end up hitting his mark. Certainly though, anyone who loaded up on energy stocks a month ago will have a few questions for this guy. Try phoning them, you probably won’t get a hold of them.

OPEC saw the speed with which people started embracing vehicles like the Toyota Prius and manufacturers like Nissan/Renault, GM and Ford started planning the alternate fuel vehicles. If the prices stayed that high the demand would crash. The OPEC chief himself came out last week and said the price should be around 80 bucks. Two weeks before the same chap was talking about 200 bucks by the end of the year.

The pyramid comes crashing down. But don’t fret in the next few weeks we’ll hear from

- The Kurdish rebels
- The broken pipeline
- War status in Georgia - Russia
- The Iranaphobia coalition
- The Olympics is over committee, China will increase demand - For you guys, China is going to convert coal to oil in 2009, removing that demand from the world oil stream. China, like Brazil and the Scandanavian countries without oil reserves, will have reduced its dependency on foreign oil and the drain of its currency to foreign interests.
- Our friend Jeffrey Rubin from CIBC that was calling for $200. His silence is deafening…