Oaktree Capital’s Howard Marks will give you $US100 if you nail the price of oil one year out.
Except that you won’t.
In an interview on Bloomberg TV on Tuesday, Marks said forecasting the short-term price of oil is basically a Catch-22 situation.
Investors need to forecast oil prices to decide whether investing in the space is a good bet. Except since no one knows where prices will be, they’re probably going to be wrong.
As Marks said, this exercise is “incredibly valuable and completely impossible.”
On Tuesday, West Texas Intermediate crude oil futures climbed 4% to around $US48.60 per barrel in New York. So Marks is basically willing to bet you two barrels of oil you won’t know what one barrel of oil costs ina year.
Oil crashed about 60% over the last year to around $US45 a barrel (but has still not fallen near Citi’s call for $US20 per barrel, made in February and again in August).
After touching $US43 a barrel in April, oil certainly didn’t bottom in April, when traders started yanking bets that oil prices will fall further. And so oil prices deceived investors last year at the top and again at the bottom.
And so Marks is willing to throw a bet out there just to convince people that they will continue to be wrong:
“The way I try to make it clear to them is I say to them OK pick a price a year out. Add and subtract $US5. I’ll bet you $US100 you’re wrong. Whatever your price is, I’ll bet you you’re wrong. And almost, I had one guy take me up, he came up afterwards he gave me his card. He said we’re on for $US100 I take $US35. So in other words if it’s $US30-40 in a year from now he wins otherwise I win. I’m going to win. And I’ll do that bet all over the place. Especially if people take all different prices.”
Here’s the ugly chart of oil prices over the past few years. Congrats if you saw last year’s 50% crash coming.