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Dec. 15, 2014 Market Comment:
The Risks Afflicting Capital Markets Today

We had warned clients on October 28th that we expected significantly lower oil prices, but the speed and scale of the collapse this month surprised us. We had not expected WTI to break $60, a price it first reached in 2005, and far below its average price of the past eight years.

Caution is in order.

That the Net Speculative position in Oil Futures has pulled back only to 2012 levels means capitulation is a long way off.

We recommend clients reduce near-°©‐term portfolio risk until oil prices have stabilized, and financial market volatility—particularly in junk bonds—has cooled. We believe that the collapse of such an important asset class is a major earthquake that will trigger further seismic shocks. It comes at a time of rising geopolitical risk, which is almost certainly bound to extend the aftershocks.

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