Sunday, June 8, 2008

Why Politicians Never Say Things That Have A Positive Impact On The Markets

The G8 is meeting in Japan and the Japanese trade minister warns of a recession based on the oil price. (Source Bloomberg)

What happens then? Of course, the markets go down. The oil price climbs and will also climb more and more over the next days due to the impact of the politician's thoughts and their need for publicity. This is not good for the markets at all.

However, this does not affect my thoughts about the oil price and its future development. It even encourages me in my thoughts about that. The markets are going crazy about oil. Nearly every single trader will tell you these days: "The price is going up - you need to have it!".

That is exactly what you should not do!

As far as the history books are telling us, politician's statements about markets and market prices never ever had the impact they thought it might have. "It always turns out different than expected" a very good old investor said some time ago. Even though most people don't want to believe that, but it is true: the price might climb some more days - and that's it.

The day all pessimists turn into optimists is "the beginning of the end". In this case: the beginning of falling oil prices and the beginning of rising option prices for me :)

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