EconMatters is not holding back here. Recall, EconMatters recently called for a bottom in oil prices (That's the Bottom in the Oil Market). And in case you don't remember, Econmatters had been negative on oil for a long time before switching her call. So while oil has been a terrible investment lately, it's already down significantly from its highs — a point Cullen Roche's makes in 2008 Has Already Happened in the Energy Sector. ~ Ilene
The Worst Oil Analysis on the Street
Courtesy of EconMatters
I happened to tune into CNBC while grabbing a bite to eat and CNBC welcomed Adam Longson, Morgan Stanley Head of Energy Commodity Research.
Adam's analysis of the oil market is so bad on so many levels that I hardly know where to start. But if this is what traders at Morgan Stanley are basing their trades on then no wonder Morgan Stanley's stock has been getting killed and talent is leaving this firm like rats leaving a sinking ship. But what can you expect from a CPA? Yes, this guy is a licensed CPA. I have a mind to short Morgan Stanley's stock, if this kind of analysis and talent is representative of what the best and brightest at Morgan Stanley are up to these days, then their earnings report is going to suffer. (I thought they were about sales revolving around money management like the old Merrill Lynch model, but whatever.)
In fairness to Adam he is also a Chartered Financial Analyst besides being an accountant (that just sounds funny) but in looking at his resume a) it is no wonder he put this crap out b) he is way over his head as an energy research analyst.
I refuse to do his job for him, so I am not going to show him why he is incorrect in his analysis. He just isn't that experienced in trading or analyzing what drives the oil markets. It goes to show how bad talent levels are at banks currently. The good talent works for hedge funds, or has gone out on their own as individual traders trading their own money with much less headaches.
Adam's analysis is flawed, and just plain wrong. If no one at MS realizes why and how it is flawed, that's a serious problem at Morgan Stanley. This has nothing to do with where the price of oil is going, it very well could go to $20 a barrel, but it sure the hell will not be because of a strong dollar. I will post two charts and let the reader and Adam figure out why his analysis is so flawed. He might want to start with that “Food Analogy” and ask why that is a flawed analogy between the comparisons he is trying to make with the oil market. This comes down to a basic understanding of logical differences. The funny thing is that I am sure Adam worked on this Food Analogy, as these are great in the analyst community for selling crap to clients, but no one at MS called him out on the fallacy inherent in his analogy. The bottom line is given this oil analysis Adam Longson has no business being an energy analyst.
