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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Tommaso who wrote (225982)	10/23/2009 9:06:21 PM
From: ChanceIs	Respond to of 306849

I think that Roubini is only half correct about crude. Oil has incredible volatility. Roubini's comparison with '05 demand and current storage surplus isn't the whole story. The bottom line with oil is that it has very steep (inelastic) curves for supply and demand. Hence a little perturbation in either supply or demand causes huge price distortions. It is a mistake to confuse storage with supply. Yes we have large storage now, but it isn't too far above the "capacitive norm." It takes a long time to rebuild storage once it is drawn down excessively and with the shape of supply and demand that can happen quickly. I wouldn't argue that crude price today in some way incorporates an "inflation" (weakening dollar) hedge. One might argue that the price in '05 did not adequately include a dollar hedge. This board is dedicated to the housing bubble. How many saw it in '05?? Stated differently, the collapse of the buck was baked into the housing bubble in '05. If nobody was willing to actively take financial positions against housing then (stop drinking of the punch bowl) then why would they adequately price in a de-facto weak buck in the oil price??? I think that Roubini is spot on regarding the carry trade. Quoting him from his appearance yesterday at the AEI..."this is the mother of all carry trades," ....and ... "we are currently in the mother of all asset bubbles." Unless I misunderstood, he regards the current equity price as being more bubblicious then the dot.com and real estate manias. I think that it is a huge mistake not to develop a complete understanding of the dollar carry trade and its consequences. I certainly got caught flat footed when the Yen carry trade unwound and sucked crude down to $30.