Yesterday’s oil price decline was impressive given the inventory report. However, this one-day oddity was made out to be some evidence of the bursting of the “oil bubble.” The stock market bulls and their spin of the oil bubble is quite a farce.

What do we mean by “bubble” anyway? One way to define a bubble is to call it a surge in prices beyond what supply and demand would predict. Problem is that we do a pretty poor job of predicting supply and demand.

First of all, I have no idea whether oil is a bubble or not or whether commodities as a group are a bubble. I don’t waste much time on pursuits like that. More importantly, I have no real idea what good it does to either define it as a bubble or to quantify what percentage of the bubble we should blame on specific groups. None of this “analysis” will result in lower prices.

But the bubble talk certainly is a fun tool for the tools permabulls. Somehow, they have become experts on what constitutes a bubble despite their failures to recognize it in the 1999-2000 tech stock bubble. Oh yeah - most of them didn’t believe the housing market from 200-2006 was a bubble either. But now, they know a bubble when they see one as it relates to oil. Okay - I got it.

The Nasdaq Tech Bubble of 1999-2000 ran up about 150% in less than two years and then declined about 75% from peak to trough. And yet, most permabulls kept denying that anything was bursting until the fall of 2000 despite losing 20% from the top.

The housing bubbles in certain metropolitan areas like Phoenix, Miami, San Diego et al saw prices run up a few hundred percent from 2000-2006 and there were quite a few people saying it was pure supply and demand - not a bubble. Since the stock market benefited from the housing bubbles, you didn’t hear too many of the bubble experts we have today opining on the size of the bubble or what would happen to the economy or stocks if it burst or what percentage decline signified the beginning of a bubble bursting. Yet, now many of these same morons proclaim that a 25% decline in some of these markets is a bottom. I am not sure how they know that.

And neither do I know how they are so certain that oil is a bubble. Consider their past performance.

Somehow, yesterday became evidence that the bubble in oil was bursting. It’s funny really. We don’t know even know if there is a bubble. I know we want to believe it’s a bubble because that means it’s not our fault and its only temporary. But none of that makes it true. And if we concede that oil prices are totally out of whack, then what evidence do we have to know that it won’t get bigger? Optimism is not fact.

Regardless, the permabulls and the media love this bubble spin. And what it really comes down to is that if they convince everyone that it is a bubble, that is good for stocks. If it’s not a bubble, then the economy is going to tank even worse than it already will. And we cannot let that appear to be a possibility. So spin away. Keep telling everyone that it’s just a bubble because bubbles burst and then we get lower prices and then the economy and the stock market will be back to La La Land - and hopefully rebuilding its own bubble that everyone seems to love. They suggest that all the fast money speculating in oil will have to find its way to stocks and voila - you get an asset allocation rally. So yesterday’s decline in oil prices was just perfect for the permabulls. To them and anyone else desperate for lower oil and stock market rallies, a 3% decline was proof that the bubble was beginning to burst. After all, if we claim that it is bursting, then it must have been a bubble, ipso facto.

So it’s all spin. If you just look at the facts, oil declined to a point where it was one week ago. That’s it. Maybe oil prices will come down a bit. Let’s say its down 25%, and we get to $100 per barrel. Is that the size of the bubble? We lost 75% of the tech stock bubble. Are we going to lose 75% of current oil prices? That would put us back to about $32. But what if this oil bubble is only as big as the housing bubbles that people want to limit to 25%?

We have multiple standards for bubbles. We fail to recognize bubbles that benefit us (housing and stocks) and we are quick to identify bubbles that hurt us (oil). We underestimate the size of the bubbles that benefit us and we exaggerate the size of bubbles that hurt us. We find it really easy to say a decline in a bubble that benefits us is only a temporary and healthy pullback, while we are quick to suggest that a decline in a bubble that hurts us is the start of a massive bursting and return to “normality.”

Stop reading my negativity - go back to the regular media and all that bubble spin.