A quick addendum to Friday's post and its updates regarding the market mayhem offered here for your Sunday reading pleasure. Gold had its biggest one day gain Friday too. Once again, another big blow to the people who argue that the price of crude oil is a "supply & demand" issue. There is an underlying price that, certainly, is related to supply & demand tension. Nobody really knows what it is. I've heard people recently say that only $40/bbl is "real" and the rest is trading froth. Others think the floor is $80.
No less a figure on the scene than T. Boone Pickens hisowndamseff thinks the total current price is "real." I haven't seen a comment about Friday's spiking action from him though. He could sell iceboxes to polar bears but he can't sell that tall tale to me. My guess, and it's only a guess, is that the price will fall below $80, maybe as far as $60, but will stabilize around the $80 level looking out over the next couple years.
I'll just say this, what happened to crude oil prices Friday was due entirely to the dollar and traders' unwillingness to go through a weekend short crude oil. The leap in gold prices Friday proves that to be so.
Meanwhile, it appears most people don't know the unemployment rate jump was mostly a statistical anomaly. (Read the Implications section in Brian Wesbury's Friday dispatch.)
Oh well, markets trade on information-- they don't always trade on correct information.