The professors said the upmove was because of unending thirst for oil among the developing markets whereas the market guys said it was a bubble, by definition caused by speculation (and in-situ hoarding). Among the latter were Paul Tudor Jones and Wilbur Ross.
Jones bet on a price collapse using futures, options and other prosaic derivatives. Ross went a bit further afield and bought a high-cost, low-fare Indian airline, SpiceJet.
Oil prices fell from an intraday all time high over $147 in early July 2008 to $30.28 in December 2008.
Assuming 10% down for his 30% piece (converts) Ross' return on equity was on the order of 500% in two years.
From CNBC:
A bubble currently brewing in sovereign debt will likely burst in the next couple of years, U.S. billionaire Wilbur Ross warned on Monday.
"I've felt for some time that the ultimate bubble, when we look back a few years from now, is going to be sovereign debt, both U.S. and other, because it's way below any sort of reversion to the mean of interest rates," the distressed debt investor told CNBC.
"If you look at where the U.S. 10-year had averaged over the 10 preceding years, it's around 4 percent. If it reverts back to that level at some point there will be terrible losses in the long-term Treasury market and those will probably be accentuated in other areas of fixed income."
Ross argued that slowing issuance of assets like mortgage-backed securities and long-term Treasurys post-credit crisis, had helped to insulate the market from the full impact of the Federal Reserve's gradual slowdown of quantitative easing - a process known as tapering.
Investors have to "build in refinancing risk" when buying assets at the moment, he said.
The amount of cheap money in the market, as a result of quantitative easing by both the Fed and its European counterpart the European Central Bank (ECB), has been credited with the resurgence in investment in assets like peripheral euro zone bonds.
Ross, who recently sold his entire stake in Bank of Ireland, said he had very recently put money into Greece and had also invested in Virgin Money in the U.K.
He bought the Bank of Ireland shares at 10 cents in 2008 and sold then for 26 and 27.5 cents earlier this month. The investment had become "too big a part of our portfolio", he said, adding "it was already a pretty big position when we started". Ross said it was not because of "dissatisfaction" with the Irish economy....MORE
