On April 12, Goldman Sachs rattled the commodity markets by telling clients to close out their long crude positions, predicting that Brent would decline by $20/bbl, or more than 15 percent, in the coming months. The market gasped, thinking “if Goldman says it, it must be so” then dutifully obeyed. The commodity closed lower by 3 percent, energy equities being caught in the downdraft.
We’ve seen this movie before and the lesson is the same: investors should do their own work so they can think for themselves.
Take a trip down memory lane to May 2008 when crude was trading at $130. Goldman made a bold prediction of a super spike to $200 within 6 to 24 months (never got close). Fast forward to September 2008 as the credit crisis takes hold causing Goldman to lower their prediction to $145 after oil traded lower to $106. Onward to December 2008; crude hits $46 and Goldman predicts $30/bbl in Q1 ’09 (never got there) and an average price of $45 for the year (averaged higher). Hmmm…market prognosticators or momentum chasers?
Fast forward to yesterday when Brent settled ABOVE the price crude closed at the day before Goldman’s Currie made his call. Can you say “whipsaw?”
Here’s the point — drum roll please. Most individual investors are resource constrained when it comes to doing independent research but relying on one source, one analyst, regardless of reputation, is a mistake. The internet — and CNBC, of course — provide the means to gather and consider multiple data points but if you’re pressed for time and want to listen to just one opinion, here’s mine. Stay long energy for the long term. Shallow valleys and high peaks. I own COP and DVN and would buy them right here. Goldman who?
- Oil Slips on US Jobless Claims, Demand Concerns
- Oil Trader: Oil's Headed Higher, Buy Transocean
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Stephen L. Weiss has spent nearly twenty-five years on Wall Street working for some of the industry’s most prestigious firms including: Salomon Brothers, SAC Capital, and Lehman Brothers. He is also the author of "The Billion Dollar Mistake: Learning the Art of Investing through the Missteps of Legendary Investors."
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