Bespoke Investment Group discusses the Oil Bubble, which has so spectacularly deflated – just look at their charts!
Bubbles: The More They Go Up, The More They Go Down
Excerpt: The carnage continues for oil this morning as the commodity is currently trading in the low $30s. As shown in the first chart below, after rallying 732.6% from its low of $17.45 in 2001 to its high of $145.29 this July, oil is now down an astounding 76.1% from its peak. In the past, we’ve compared the oil bubble with the Nasdaq and homebuilder bubbles. At its current price of $34 and change, oil only needs to fall another $2 to see the same declines that the Nasdaq saw during the bursting of its bubble. The only difference is that it took years for the Nasdaq to reach its lows, while oil has declined by almost as much in just a few months. Back in September, we highlighted our bubble comparison and suggested that oil in the $30s wouldn’t happen until 2011 if it took the same track as prior bubbles. At -76.1% in 5 months, oil’s fall, like the drop in the Baltic Dry Index, is one of the most extreme bubble bursts in history.
Continue here.
