The Day Oil Went to Zero

My favorite scene in ‘Goodfellas’ (how do you even choose?) is where Joe Pesci tells a story about being interrogated by cops after being caught while pulling a job, laying in the weeds in See-caucus. The cops are hitting him and he’s not giving them the answers they want. “What are you gonna tell me now, tough guy?”

Most people don’t tell a story about being beaten up with the joie de vivre Pesci displays for his fellow hoods at the tiki lounge that night, which is how director Martin Scorsese demonstrates what an absolute psychopath he is. This will be an important detail, later…

Anyway, today we – all of us market participants – watched something so brutally unintelligible take place that it almost forces us to ask ourselves “did it actually happen?” The price of West Texas Intermediate Crude Oil for next day’s delivery went to zero dollars per barrel. And then it actually went negative!

There are a whole host of technical factors related to the mechanics of the futures market involved, which I won’t get into here, mostly because they are unimportant and won’t be remembered. What will be remembered is that the price of the world’s most widely quoted and traded and utilized physical commodity was, for one shining moment, worth less than nothing. You had to pay someone to take it from you.

One of the things the old timers like to tell the young guys and gals is that they’ve been through some inconceivable shit in their day. Guys in their 50’s talk about the one-day 23% crash of ’87. Guys in their 60’s talk about the stagflationary quagmire of the 70’s. And I’m always very respectful of their experience, and the things they’ve been through – as a student of history, how can I not be?

But today…today we saw some shit. This is my third recession as a professional money manager. And outside of talking to someone who lived through the Depression (is anyone left?), I’m realizing that I am now thoroughly unimpressed with the lived experience of the old timers, the guys who tell me how I’ve never lived through the things that they have in a market context. “You can’t imagine the things I’ve seen, young man.”

I just watched the price of a barrel of oil go to zero. And I’m still going to wake up and go at it tomorrow.

What are you gonna tell me now, tough guy?