Feverish headlines

By Benedict De Meulemeester

By Benedict De Meulemeester on 12/05/2009

‘Swine flu causes feverish energy markets’, I’ve read as a headline in an energy market report  sent to customers by a Dutch utility on Tuesday. My congratulations, what a beautiful headline. Connecting the ‘flu’ element with ‘feverishness’ in the market, great association! Just one little problem: the facts don’t really fit. Having read the headline, I immediately called our analyst. What was happening? Were we missing something? Because our analysis is that we see a very quiet market these past few days with low volatility. This low volatility in itself is news, after months of extremely high volatility. But, of course, ‘Swine flu causes a decline in feverishness in the energy markets’, that is not such a nice headline, is it? So the energy report sent a message into the world that the market was feverish.

This makes me think about the many times that I have been contacted by clients in panic about something they had just ‘read’ or ‘heard’. The panic that I felt myself when that news is contrary to our assessment of the market. The times I’ve called the analysts to ask them why we missed that news. And the many times that it turns out that the news was in fact something that happened a few days before and was already outdated by newer events. The many times that the news turned out to have been invented of an over-reaction.

Energy markets are like most other global markets, populated by masses that are being motivated by greed and fear, and these emotions make them nervous. Nobody wants to miss that tiny piece of news that can lead to a fantastic deal. In such a ‘feverish’ climate, it is not strange that information gets misrepresented. It teaches us how important it is to treat information (whatever its source) with caution and to verify it and trust the firsthand information, such as the price information itself.

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