Here is a comment from Brad about my call for lower oil prices heading to the election. He also asks, what are my investment strategies based on my theory;
Thanks for your posts regarding the correlation between the price of oil and the November elections. After reading your previous posts the recent news headline "Successful Test Well in Gulf of Mexico Means U.S. Oil Reserves Could Grow More Than 50 Percent" (source: CBS Marketwatch) seems like blatant manipulation of public opinion.
Todays WSJ article states the oil well in question was discovered in 2004 by Chevron and Devon. Further, it has been producing oil for a couple of months. So why is this suddenly front page news? Also, why is the media suddenly extrapolating that based upon other wells and 'potential' discoveries in the area U.S. oil and gas reserves are 50% larger?
Now that you have more evidence to support your theory regarding a short term drop in the price of oil what investment strategies and/or trades are you implomenting based on this theory?
First of all, thanks for your comments. I was wondering if anyone was paying attention, and I am glad you were.
Let me start by saying I often wonder what kind of world the average American actually believes we live in ? An investor needs to step back and really see the big picture before committing their hard earned capital into a system that is designed to manipulate the majority in favor of gains for the few.
Wall Street was not designed as a place for the average Joe to get rich. This is why so many investors got killed when the NASDAQ crashed in 2000, and why so many will get burned by the Real Estate craze. Whenever we hear about how great things are in a particular market or sector, we should look to see if we should be selling or taking the opposite side.
Concerning your question about investment strategies and/or trades are you implementing based on this theory, my answer is as follows;
1) I learned the first two rules from Jim Rogers One of the best rules anybody can learn about investing is to do nothing, absolutely nothing, unless there is something to do. Wait for something to come along, then take profit, put the money back into the money market fund and wait for the next thing.
2) Dont lose money. If you dont know the facts, dont play. "I just wait until there is money around the corner, and all I have to do is go over there and pick it up. I do nothing in the meantime."
3) If you understand Sector Rotation, then start by making a list of companies you want to buy, in the sectors that will benefit as the economic and market cycle moves from Early Recession, to Full Recession, to Early Recovery, and eventually to Full Recovery.
The sectors and stocks I am looking at are as follows;
Medical: MDT, STJ, SYK, BSX, JNJ, ZMH.
Staples: HSY, TR, BFB,
Financials: BAC, C, FITB, WM, ALL, WB, AIG, WFC, ONB, MEL, RF, AMTD, UBS
Cyclicals: LOW, HD, VIA, TRB, GCI, PNRA, CAKE, OSI, PFCB, DIS, NVR, PHM, JOE, WMT, EBAY, SBUX, BBY, F, GM, JOSB, AEOS, ANF.
Industirals: GE, UPS, FDX, MMM, CAT, MAS, LUV, DALRQ.PK (Once out of bankruptcy), ASD, CSX.
*Materials: BHP, FAL, USG, PD, PCU, GLD, TCK, RTP, CCJ, ACH, AA, MON
*Energy: MRO, VLO, TSO, BTU, ECA, PTR, CNQ, IMO, UEYCF, SU, CEO, STO, OGZPY, CHK.
Technology: AAPL, ERTS, DELL, ADBE, INTC, MXIM, LLTC, GRMN, AMAT.
I will continue to add to my list and buy stocks as they hit my price targets. I also enjoy selling put options on stocks I want to own to generate cash. If I have a stock put to me thats fine, if not, I keep the cash.
I did nibble at the following stocks; USG, PFCB, OSI, CAKE, and LOW.
Note the asterisk above under the Materials and Energy sectors. I believe we are in a longer term bull market for these sectors, but my concentration in energy is in companies that I feel may be takeover candidates in the future, or have exposure to the Canadian Tar Sands.
In the 1970s the Canadian stock market did very well, and I think it will continue to do well in the years ahead. Canada is basically a commodity country, and since I believe we are early in the commodity bull, Canada will continue to do well.
As far as the Canadian Tar Sands are concerned, foreign countries like China will be looking to add to their reserves. Since political pressure in the US will prevent a US company from merging with a Chinese company, it makes sense that China will be shopping for companies in Canada.
Diminishing oil reserves will be a big problem for the major US oil companies in the months ahead. They will also be looking to buy companies to increase their reserves.
Since most, if not many of the great oil fields in the world are in decline, Canada looks to be the hotbed for merger activity.
In 1979, Saudi Arabia said they had 245 billion barrels of proven reserves. Every year since 1988 the Saudi Arabia have been saying that they have 260 billion barrels of reserves. Unless the Saudis have a geological phenomenon happening underground, we have to assume that these reserve numbers are not accurate.
The world is in search of oil, and Canada has the oil.
