Hedge funds, an investment vehicle to protect, (or hedge) against more volatile and risky investments seem to feel oil futures are bullet-proof. These giant investment firms wield enormous power & influence, and employ some of the best analysts anywhere.
Seems the smart money thinks oil is going to get more expensive. So much so they are willing to buy, in massive quantities, oil futures even at todays record price.
IMO this may well be the most convincing argument that a real peak is upon us. Goggle hedge fund. Not oil hedge fund or whatever, just hedge fund. How many links related to oil do you see?
However, today oil company shares are trading at modest earnings multiples and have been ignored in the market recovery. If the market goes up they should be dragged up too; if the market falls for reasons related to the oil price then oil shares will still go up. Oil is a great hedge fund right now.
http://www.ameinfo.com/news/Detailed/35907.html
http://www.ipe.com/article_default.asp?article=16757
LONDON (Reuters) - Pension funds, often among the most cautious of investors, are sizing up oil and other commodities as a permanent way to secure robust returns, helping sustain prices near multi-year highs, analysts say.
linkThe record level of fund investment in oil is now formidable so that there is a real danger of a rapid sell-off that could wipe several dollars from the price in a matter of days.
But even if oil prices fall from current highs, funds might see this as an opportunity to reinvest. "If there's a sell-off, followed by a quick recovery and a new net high, it'll probably go higher," said Craig Reeves, managing director at hedge fund Platinum Capital Management. "I wouldn't be surprised if you saw $50 a barrel, but that would be speculative and not based on real demand."