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Top Links: Bullish ‘oil god’ throws in the towel on crude price

A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web

People underestimate the Motley Fool website because of its frivolous name, but it remains a terrific source of investing information.

Today's post might explain why they keep the moniker – to maintain a sense of humility in dealing with the markets – as writers recount their worst investing mistakes. Selena Maranjian writes about getting sucked into penny stocks,

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"[Penny stocks are] typically tied to small, unproven companies that feature more promise than performance. They're mostly about a great story: This company is close to curing cancer! That company is on the verge of a massive gold or oil discovery! Once the hoped-for event occurs, great profits will follow. Right now, though, these companies are very likely to be burning through what little cash they have … As I look over my portfolio, which features more winners than losers and far more gains than losses, I nevertheless wince at many of my losers. And I marvel that almost without fail, my biggest losers are penny stocks."

"1 Big Money Mistake I Should Have Never Made" – Motley Fool

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Crude prices are higher this morning after Venezuelan officials hinted at an imminent multi-national deal to curb production levels. This is a "Boy Who Cried Wolf" situation. We've seen this movie before, but one day it might still be true.

"OPEC 'Very Close' to Agreement to Stabilize Market, Maduro Says" – Bloomberg

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As a counterpoint, Andrew "Oil God" Hall appears to have abandoned his bullish call for the oil price to return to $100 per barrel,

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" Hall, whose record profitability in oil trading has earned him the nickname 'the Oil God' has been claiming that oil will return to $100 a barrel since the price of the commodity began its decline during 2014. But in a letter to investors of Hall's hedge fund, Astenbeck Capital at the beginning of September, the oil God appears to backtrack on this target, according to a copy of the letter obtained by ValueWalk. .. In his September letter to investors Hall writes, "for now however, prices will be driven by sentiment and positioning. Until we see a decline in U.S. oil inventories, investor sentiment will be skeptical. This means for now we are likely to see prices in a $45 to $50 range (for Brent) before a sustained move higher…""

"Long-Time Bull, "Oil God", Andrew Hall, Capitulates On $100 Oil; Sees $45-$50 Range" – Value Walk
"Oil Investors Flee as OPEC Freeze Hopes Face Supply Reality" – Bloomberg
"McKinsey Energy Insights predicts oil market oversupply into 2017" – Your Oil and Gas News

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Hedge fund superhero Ray Dalio is concerned that investors, who haven't dealt with a sustained bear market in bonds for decades, will take big losses when interest rates move higher,

"'The potential for relatively big losses in bonds worries us because bonds effectively haven't had a bear market in decades," he wrote. "The vulnerabilities to that sort of a move haven't been tested' [Mr. Dalio said], 'We want to point out that what is also happening in capital markets is the classic 'carry-price change trap,' Dalio wrote. 'It happens when investors focus on the carry and pick higher-yielding assets, which drives them up so that price movements work in their favor.' 'Seperate analysis points to price momentum being cyclical in nature. At some point all trends end. "This goes on until there is a price correction," Dalio wrote. It is at this point 'everything changes and a self-reinforcing reversal takes place.'"

"Ray Dalio Warns "Certain Investors Will Be Shocked" – Value Walk

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Tweet of the Day: "@jimcramer oil up 69 cents so [equity] futures soaring. Breathtakingly stupid" – Twitter

Diversion: "If Trump wins, what is the best theory of why?" – Cowen, Marginal Revolution

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About the Author
Market Strategist

Scott Barlow is The Globe's in-house market strategist. He is a 20-year veteran of Canadian investment banks, including Merrill Lynch Canada, CIBC Wood Gundy and Macquarie Private Wealth (MPW). He was a highly ranked mutual fund analyst for 10 years and then, most recently, the head of a financial adviser support team at MPW. More

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