A couple of days ago I wrote about Cramer calling a top in oil telling people to either get defensive or get out completely (I was in my car at the time and with all he has going on I readily admit I might have mis-heard which of the two he said).
I mentioned I took some beta out of the sector during the spring and that I was not planning to sell any more in the group.
Yesterday I saw a package on Boone Pickens and he said oil will go to $75 over the next year (I believe that was his time frame).
So what should you do?
I think this can be resolved reasonably simply. Forget about stocks and markets for a moment. Do you buy into the goings on in China and India? If you do, how long to you think the growth, expansion and modernization will last? If you think it will last for a long time then you have to think that daily demand will grow faster than supply can grow.
I have written many times that I think Pakistan and Viet Nam will be the next big emerging markets. Do you think there is a shot of that happening? If there is a shot, this would mean yet more demand in a few years.
You probably know Japan imports 100% of its oil. I don't think there will be a big ramp up in demand from Japan but what about Korea? Korea imports 100% of its oil. I don't know the Korean story very well but I would not be shocked if demand increased there either.
For all the chatter about Petrobras (PBR), Brazil does not export that much oil and over time I think there is visibility for less exports from Brazil in the coming years.
I could be wrong about this whole thing but I have been writing about a long term change in the supply and demand equation for oil ever since I started this blog. I have trouble believing the whole theme has unraveled because oil dropped 4%, or whatever, on Wednesday.
That does not mean the commodity and the stocks won't go down in price for months at a time and to be clear I did cut back some earlier this year.
What do you think will happen?
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7 comments:
Hi Roger, I came across your site a few weeks ago and not its regular reading for me as I really like your approach to stocks and your straight forward opinions. As to your comments on oil, I agree with you but I must admit I sold 6000 shares xle as Schwab feels its time for a temporary breather on that oil etf. I'm no day traider but I put in a limit but at 5% below my sell and hopefully get back in. Actually I felt bad about my sell as I really think xle will gain over 10% a year over the coming years. Hope my greed didn't screw me up. Xle is up today. Keep up the great blogs...........Marty in "
Sonoma Ca
I think oil will continue higher, especially as winter approaches. Long term, if the emerging economies continue to grow, their demand will grow...and T. Boone just keeps hiking his oil forecast every few months, and he has been on target so far.
Roger,
3 years ago oil was cheap and I bought 3 of the majors. This week it is expensive and I sold my weakest one and kept the other 2 for the long term. I think the price of gas in the US has finally reached the point where it will begin to effect consumption. Price controls and subsidies will be dropped in China, Indonesia, etc in the near future to reduce demand. I only think this will buy the world a couple of years before we see prices going up again. Too much demand, too little product.
Jim in LV
Future economic power - Vietnam may be, but Pakistan definitely no. That country has too many deep rooted structural problems, which cannot be alleviated by a burgeoning population. In fact, in this case, the expanding population is another one of the handicaps rather than being an engine of growth.
Future economic power - Vietnam may be, but Pakistan definitely no. That country has too many deep rooted structural problems, which cannot be alleviated by a burgeoning population. In fact, in this case, the expanding population is another one of the handicaps rather than being an engine of growth.
thanks for all the comments.
Marty post about XLE and Schwab will be a topic for a post.
My ideas about Viet Nam and Pakistan are not about whether they will be economic powers. I think they will both emerge to demand enough resources to further complicate supply and demand for all sorts of things. These comments have nothing to do with them as investment destinations.
Good morning...
Rogers is talking $100 oil
& Soros is selling energy....
http://today.reuters.com/news/newssearchresults.aspx?srch=soros&searchtype=a
Dave in the ADK's
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