Market Overview

Here's Why Oil Is The New Housing Bubble

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Oil has broken its five-year lows and the $60 level.

Rob Raymond of RCH Energy, a private equity fund specializing in investments in the energy sector, was on CNBC to discuss how oil was a bubble that has burst and the similarity between the collapse of oil prices with the housing collapse of 2007-2008.

"It's really is the sort of the outcome of a zero interest rate policy from the federal reserve and what has happened in the 2009 to 2014 time frame is that the energy industry has outspent its cash flow by $350 billion to go drill all these wells and create sort of this supply miracle, if you will, in the United States," Raymond said.

"I think the issue what this becomes though is that were houses in Florida and Arizona in 2000 to 2005 and 2006 became oil wells in North Dakota and Texas in 2009 to 2014. Most of that was funded in the high=yield market and by private equity, they outspend the $350 billion."

On whether equity markets would fall as a result of oil companies selling their assets if crude continues to fall, Raymond said, "It's hard to predict really sort of, I guess correlate the overall direction of the stock market with energy. I think, our concern would be that what all characterizes conventional thinking in an unconventional world."

Posted-In: CNBC RCH Energy Rob RaymondCommodities Markets Media

 

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