Why Oil Prices are Falling: The Secret Deal Between the U.S. and Saudi Arabia
Dear Readers,
It’s been a while since I wrote specifically about the market.
So this week, I want to touch briefly on the markets before I get into the real reason why oil prices are falling; and no, oil hasn’t fallen just because of a supply glut.
In many of my past letters, I said that we should be very careful how we invest this year; that while the market could continue its meteoric rise, the later half of the year may bring us extreme volatility:
“Despite the uncertainties around the world, the stock market continues to march on (as I mentioned they would likely do in my Letter, “ What to Expect for 2014“).
Last year, and every year post-2008, I was confident the stock market would continue to set new highs.
This year, I am much more cautious.
It’s been over five years since the great crash of 2008. The markets have climbed, creating newfound wealth for the 0.001 per cent. Yet, as I sit here writing this, I can’t help but feel worried for our future.”
Since the end of summer, the market has dropped and rebounded in volatile fashion.
As a result, the VIX index, a measure of how volatile the S&P 500 is likely to be over the next 30 days, has shown some very unusual and unprecedented activity.
And I am not talking about the VIX’s obvious spike since the beginning of October.
Over three consecutive trading days starting from October 17 to October 21st, the VIX has dropped more than 10%. The VIX has NEVER dropped more than 10% for 3 days in a row…ever.
This has no doubt fed into concerns that the market may either be about to experience more turmoil, or there is a much bigger force at work stabilizing fear in the market.
Thoughts of my past letters, such as, “How Does the Fed Influence the Stock Market,” come to mind…