Slippery Slope: The erratic behavior of oil futures offers a glimpse into the risks investors face.  Photo: Cnooc

Translated by Andrew Vanburen from: 金融博弈  變幻莫測  炒股切忌賭身家 (中文翻譯, 請閱讀下面)


When a country endures a shock, such as a military coup, the local bourse usually bottoms out.

At the same time, global investors usually prefer the greenback over the local currency, seeing it as a safer bet in times of turmoil.

These are relatively predictable outcomes to global crises and generally do not transpire without ample warnings.

Armed takeovers aside, macroeconomic surprises and external shocks also tend to pummel investor confidence – even if the drastic prime rate hike or shocking sovereign debt revelations are oceans away from the capital market in question.

As the saying goes, markets go up, and markets go down.

But when the frequency of such gyrations intensifies during volatile economic times, un unsettlingly large sampling of investors often throw caution to the wind and transform overnight into reckless gamblers with their money, perhaps taking a devil-may-care Armageddon-like attitude toward the bourse.

That is not the way to go, I would strongly contend.

You’ll find the most avid fans of Premier League football spending their idle hours before games boning up on the latest injury reports, red card layovers, matchup histories with opponents, as well as weather conditions before placing a wager on their pick.

In the same way, you can find retired pensioners in Hong Kong at one of the two major tracks squandering away their children’s inheritance on their favorite pony – whom they may know more about than their own progeny.

But unlike betting win, place or show on the horses, financial markets are a completely different animal altogether, and arguably much less predictable.

Let’s take the recent behavior of crude oil futures as an example.

Usually, the segment would be promoted as a safe, staple and stable bet which would then overreact with a price spike amid any global shock only to elicit a spurt of overproduction which would quickly erase price advantages for investors.

Nowadays, the crisis wracking Europe is showing no signs of abating and stock markets there are in the doldrums with crude oil futures floating at relatively high levels and trending upward.

Normally, this would mean purchases of oil futures under this scenario would bring more value to the investor.

Unfortunately, these are not “normal” times.

It seemed the perfect time to offload, which I did.

No Laughing Matter: Oil futures are a volatile bet. Photo: Sinopec

But no sooner had I cleared my crude oil futures, thinking a near-term nadir had been achieved, when up went to price once again, and in no uncertain terms.

The price per barrel quickly surged to 103 usd.

But this spurt, it turns out, had little to do with the intensifying sovereign debt impasse in the EU. Nor was there any major announcement from the principals via OPEC or any other group as to a sudden change in production volumes.

Instead, as the crude gods would have it, a long-simmering story that had been cruising under the radar for so long finally broke through and made headlines again, taking oil prices along with it for the ride.

The US is still the world’s top consumer of petroleum, and the biggest supplier to the States remains its northern neighbor Canada.

Therefore, any jolt to this longstanding commercial tandem is bound to send shockwaves throughout the industry, and that is precisely what happened recently.

The Obama Administration, caving to what many claim are environmental special interests, opted against a plan by Calgary-based TransCanada Pipelines to build a pipeline linking the western Canadian province of Alberta with the Gulf of Mexico.

The project’s value was in the billions of dollars and would have meant thousands of jobs on US soil.

Instead, a smitten Canada said it would consider running the pipeline west to British Columbia where Chinese tankers were more than eager to ship it off to the People’s Republic.

The sudden rejection and resulting stalemate in the proposed pipeline project took the global industry by surprise, and once again exemplified how risky and unpredictable financial markets are, by nature.

See also:

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金融博弈  變幻莫測  炒股切忌賭身家




黃國英, 豐盛融資資產管理部董事







See also:

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