Soros warns of oil bubble

Billionaire investor George Soros is to tell US lawmakers on Tuesday that “a bubble in the making” is under way in oil and other commodities and that commodity indices are not a legitimate asset class for institutional investors, according to a report Tuesday in the Financial Times.

According to prepared remarks, Soros will tell a congressional committee that while rising oil prices are the product of changes in the market, the commodity’s steep price rise is partly a result of large investment institutions putting money in the oil futures market — which is creating an oil market bubble.


His remarks are also expected to turn light to rising food prices, where a similar speculative investment maelstrom may be looming. Soros’ $17 billion hedge fund declined to comment on their investments in these areas.

“I find commodity index buying eerily reminiscent of a similar craze for portfolio insurance which led to the stock market crash of 1987,” Mr Soros will tell the Senate commerce committee, according to a draft text provided to the paper.

“In both cases, the institutions are piling in on one side of the market and they have sufficient weight to unbalance it. If the trend were reversed and the institutions as a group headed for the exit as they did in 1987 there would be a crash.”

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