In Search of the Perfect Investment

Last night I dreamed oil hit $20 a barrel. It’s now $60.

Buy Blackstone Group (BX).

I don’t know how to make money on oil.

But Blackstone sure does. Stephen Schwartzman, Blackstone founder and CEO, raised one energy fund of $2.5 billion. It’s returning 44%. He’s raising another one of $4 billion plus. (He didn’t ask me to participate. Shucks.) He couldn’t be more optimistic.  He sees oil as a commodity where prices overshoot — both ways. He sees tremendous opportunities in “restructuring” the companies who raised money based on $100 a barrel. Now it’s 40% less. Imagine building a chocolate factory and finding six months later, the price you could sell your chocolate has plummeted 40%. You’re going to need some financing before the price picks up and before you can figure how to reduce your costs.

Today’s New York Times Dealbook:

Yesterday, Stephen A. Schwarzman, the chief executive of the Blackstone Group, discussed oil prices and investing with an energy fund.

To view the video click here.

Here are excerpts from yesterday’s New York Times piece:

With oil prices falling, the world’s largest private equity firm sees a buying opportunity.

The Blackstone Group, the private equity giant run by Stephen A. Schwarzman, is almost finished raising a new fund for energy investments that is expected to exceed $4 billion in assets. On Thursday, Mr. Schwarzman said he had particularly high hopes for the strategy.

“I think this is going to be a wonderful, wonderful opportunity for us,” Mr. Schwarzman said at the DealBook conference in Manhattan on Thursday. “It’s going to be one of the best opportunities we’ve had in many, many years.”

The price of a barrel of crude oil fell below $60 on Thursday for the first time since 2009, furthering weeks of declines that have put pressure on the energy production industry. Shares of energy companies have fallen since the summer, when oil prices peaked.

Amid the turmoil, the Organization of the Petroleum Exporting Countries has declined to cut its production to support prices and focused instead on defending its market share. Laurence D. Fink, the chief executive of BlackRock, said on Thursday he had learned that Abu Dhabi of the United Arab Emirates had recently increased its oil production to preserve its cash flow.

The boom in North American energy production has increased global supply and probably contributed to the fall in prices, Mr. Schwarzman said. While OPEC may be concerned, Mr. Schwarzman expressed excitement.

“This is a wonderful, wonderful time,” he said. “This is a commodity. It’s not patent-protected. Commodities go into undersupply and oversupply.”

Bloomberg has a piece on energy this morning. They say:

Borrowing costs for energy companies have skyrocketed in the past six months as West Texas Intermediate crude, the U.S. benchmark, has dropped 44 percent to $60.46 a barrel since reaching this year’s peak of $107.26 in June.

For the piece, click here.

Energy stocks have fallen, even the largest. These are six month charts:

So, buy these companies.  They’re cheap.

I have two problems:

+ I don’t like catching falling knives.

+ I don’t think we’ve seen the full effect of these falling oil prices on their balance sheets. I’m guessing it’s going to be devastating — akin to what happened to the banks in 2008.

Here’s Exxon over ten years. It’s been higher (a little). But it’s been much, much lower. You’d have to conclude that Exxon is not the great bargain it was at the end of June in 2010.

To repeat yesterday’s charts. You can also click cursor across the bottom of each chart to see longer views of oil’s price.

The Sony hacking mess. The nasty stuff Sony executives put in emails has come home to haunt them. Idiots. Email is for only three things. I repeat:

+ Sending requested information.

+ Confirming what you’ve agreed to (a sale, a meeting) and sending details.

+ Sending compliments.

If you have problems, pick up the phone. Better yet, go visit the person. You will be pleasantly surprised how a face-to-face meeting quickly resolves the monumental insanities building up in your tiny brain.

Personally, I like Angeline Jolie. She’s talented, successful and pretty.

9 Things Remarkably Successful People Never Do. From Inc magazine:

1. They never let the past dictate their future.

2. They never gossip.

3. They never say “yes” when they really mean “no.”

4. They never interrupt.

5. They’re never late (without an incredibly good reason).

6. They never resent.

7. They never decide they don’t have the time.

8. They never fit in (just to fit in).

9. They’re never afraid to do the things that matter.

You can read Inc.’s full explanations. Click here.

Christmas presents continued:

+ The world’s greatest magnifier. You need one. Trust me. The Carson 5x MiniBrite LED Lighted Slide-Out Aspheric Magnifier with Protective Sleeve.

 A powerful lens with an LED powered by three AAA batteries (not included). Costs a pricey $9.80. But worth every penny. Buy it here.

+ I’m sick of not finding the lid for the container of delicious leftovers I want for lunch tomorrow. This is THE solution:

$35. Buy it here.

Roku and Slingbox. Two great, cheap ways to watch TV over the Internet.

+ Slingbox. $149. Watch your home TV and home PVR from anywhere in the world. Don’t miss your favorite shows when traveling. Click here.

+ Roku. $79.99. Less than I paid for mine. Click here.

More presents Monday.

Harry Newton, who bought the wrong laptop. Who bought three of something when he only wanted one. Who bought when he wanted to sell… All because he worships speed. I sent an email to the wrong David. Dumb! Remember our motto: CHECK. CHECK. CHECK. Good to check before you hit the Submit button.

Chris Rock was really good on Charlie Rose last night. You can watch the interview in a day or two on the Charlie Rose’s web site. Or you could watch it via my Slingbox, since I recorded the show.