Slicing Through a Bubble

We’ve popped the internet and the housing bubbles. So what comes next? Many people think that the next bubble to burst will be oil. But are we really in a bubble?

Oil prices have gone up in recent years even as production has risen. That means that the price is going up because demand is increasing.. That marginal demand is mainly coming from China, India, and the rest of the developing world.

If we were in a bubble, there would be extra production and lower demand. Inventories would be rising. We saw that with the internet (remember Cisco’s inventory problem) and housing. But oil inventories have been pretty stable.

So what is the likely future oil price? That depends on many political things we can’t predict: energy policy, tax incentives, environmental regulation, and others But one thing is clear. At these prices, consumers will slow their consumption. It just takes some time for them to ease up on the throttle.

Douglas R. Tengdin, CFA
Chief Investment Officer
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By | 2014-09-03T18:54:38+00:00 May 21st, 2008|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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