Blind faith: Why following commodity forecasters is a bad idea

We all like to read forecasts of what the future holds. But, in the case of the outlook for commodity prices is following the lead of one commodity forecaster or another just blind faith?

Over at Cullen Roche’s excellent Pragmatic Capitalism blog, Cullen illustrates a point about the multitude of articles about how bearish George Soros is on a particular asset market. Cullen goes onto say how this could potentially lead individual investors into trouble.

In all seriousness, the key lesson here is that we need to be very careful about how much we read into news headlines about market gurus. It’s very easy to get swept up in the idea that a wealthy investor knows more than the rest of us and that we should follow their disclosed moves as reported and after the fact. The financial media loves to use big names to grab headlines and page views. But in many cases you’re not getting the full story about what this investor is doing. And following their supposed positioning could lead to bad decisions and unnecessarily poor performance.

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How big is the oil price ‘risk premium’?

After an 18 month hiatus the oil market has rediscovered the term ‘geopolitical risk premium’.

Oil supply outages are at their highest level in more than a decade bolstering the risk premium that has helped drive crude oil prices from $35 per barrel back in February to $50 per barrel in early June.

According to energy economist Philip Verleger Jr. the $15 per barrel rise in prices can be entirely explained by recent unplanned outages. The outages removing at least 1 million b/d and up to 2 million b/d at its peak.

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Hurricane season: La Nina could lead to late summer oil price spike

The Atlantic Hurricane Season starts today (1st June). The US National Oceanic and Atmospheric Administration’s (NOAA) climate prediction centre is expecting a near-normal Atlantic hurricane season in 2016.

In its prediction for the season, which runs from June to the end of November, the NOAA expects there to be 10 to 16 named storms, four to eight hurricanes, and one to four major hurricanes, with “major” deemed to be Category 3 or above.

However, other forecasters think activity will be greater, citing the impact that La Nina typically has on hurricane formation.

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