Spread Betting on Crude Oil Prices and UBS
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Trading Features / Strategies from Simon Denham of Capital Spreads.
With analysts always trying to get their names in the paper the announcement by Goldman Sachs that Oil was due to hit $200 could have been predicted with rather more certainty than the actual possibility of this truly happening. Big figures exert a magnetic attraction over and above their actual meaning. In reality there is no difference between $200.00 and, say, $135.32 (aside from the actual figure) they are both just numbers. Neither number represents a significant yield level, fundamental return, impact on inflation or drag on world economic growth but $200 looks much better in print than $135.32 and ensures widespread reporting of the Goldman Sachs brand name (which is what it was designed to do).
Mind you, we might hit $200 bucks in a sort of ‘super spike’, who knows? At that price virtually every airline would be bankrupt as customer numbers plummet and even in the highly taxed environment of the UK petrol market the price of fuel would eat into the earnings of even the reasonably well paid. (Personally I have never understood why there are not more illicit petrol sales, as opposed to Tobacco and Alcohol. The profits to be made would be phenomenal). Retailers would get hammered as well as the discretionary spending available in everyone’s pockets would be considerably reduced.
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The unexpected loss reported by Carlsberg this morning might have rather more long term visionary practicality than the Goldmans Oil statement. The company was expected to report a profit of some 37m DKr but actually came in with a 129m loss. The reason given was due to higher marketing, energy and distribution costs. Marketing is obviously a huge slice of ‘probably the best lager in the worlds’ expenditure but the hikes in energy and fuel related distribution will be worrying analysts across a swathe of sectors. If this hit to margins is replicated across the board the reporting season could be a bit grimmer than expected.
For more details on Oil trading see: Crude Oil Spread Betting
UBS
It never rains but it pours for poor old UBS. Hard on the heels of the debacle over sub-prime asset write downs comes the news that their much vaunted wealth management unit in the US is being investigated for the period 2000 to 2007 over advice given to US citizens. In a sort of double whammy they are also being done over by the Germans over possible advice to the clients to actually hide funds from the authorities. This type of bad news can be terminal as high net worth clients will naturally shy away from anyone likely to be attracting the specific interest of the tax authorities. The fact that withdrawals for the first quarter were greater than deposits is not exactly encouraging when you realise that this state of affairs happened before the aforementioned Tax investigations. What will be their deposit/withdrawal rate over the next few months? The announcement of some 2,500 jobs to go in the US and UK may not be as hard as they thought as client managers proceed to jump ship for pastures new.
The above comments do not constitute investment advice and neither Capital Spreads nor Clean Financial accept any responsibility for any use that may be made of them.
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Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.
Article provided / approved by Capital Spreads which is a trading name of London Capital Group Ltd which is authorised and regulated by the Financial Services Authority (FSA), FSA Register number 182110.
'Spread Betting on Crude Oil Prices and UBS' edited by SD, updated 07-May-08
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