Should I buy oil and oil service stocks now?
It’s dangerous catching falling knives.
A wise old investor once said, “If the stock is going down, it will probably keep going down.”
Two examples:
The pipeline companies are holding up better (a relative term):
Everywhere there are stories forecasting further decline in oil –it’s already fallen 40%+ this year. Stories include Bloomberg’s “U.S. Getting Rid of Oil Addiction as Price Plummets in Glut” — Click here. The Bank of America today forecast $50 a barrel.
Here are two charts. I picked up the code from a web site called oil-price.net.
Clearly, the intelligent move in the last few months was to short any and all oil and oil service stocks. But who figured this out? One moment the brain is attuned to the incredible fracking boom, with stocks like EOG being hyped on TV every moment, to the next moment when suddenly we have a severe surplus of oil and the price is plummeting.
This makes investing “fun”, but harrowing.
Index funds (e.g. VFIAX) and broad “conglomerates” (e.g. BRKA) make sense for the faint of heart (like me).
Going forward:
+ 12% of the S&P 500 is energy.
+ If oil price stays at these low levels (around $60), then many companies will have real difficulty paying their debts. That could seriously jeopardize their finances, and put some into Chapter 11, effectively driving their common stock to zero. Hence making them great shorts today.
Remember our old favorite short (courtesy Jim Chanos):
Six books Bill Gates thinks you should read. I haven’t read any of them. That doesn’t mean you shouldn’t. Click here.
I continue to love Software King. They’re one of the few online software providers who treat their customers (i.e. me) right. Great for buying Office 2010, which is cheaper and better than the latest stuff. Click here.
Want to live in Wilton, Connecticut? They got good schools. This place is a bargain, down nearly half from what the owner paid recently. Click here.
To cheers us up.
+ A woman gets on a bus with her baby. The bus driver says: Ugh, that’s the ugliest baby I’ve ever seen! The woman walks to the rear of the bus and sits down, fuming. She says to a man next to her: The driver just insulted me!
The man says: You go up there and tell him off. I’ll hold your monkey for you.
+ I asked the gym instructor Can you teach me to do the splits?
He answered. How flexible are you?
I can’t make Tuesdays.
+ I went to the doctors the other day and I said, ‘Have you got anything for wind?’
He gave me a kite.
+ My mother-in-law fell down a wishing well, I was amazed, I never knew they worked.
+ I went to buy some camouflage trousers the other day but I couldn’t find any.
+ When Susan’s boyfriend proposed marriage to her she said: I love the simple things in life, but I don’t want one of them for my husband.
+ My therapist says I have a preoccupation with vengeance. We’ll see about that.
+ I rang up Verizon, to report a nuisance caller.
The operator replied, Not you again.
+ A priest, a rabbi and a vicar walk into a bar. The barman says, Is this some kind of joke?
Harry Newton whose daughter, Claire, became a lawyer. The more I deal with her professionally, the more impressed I am. I did good. Though I secretly think her mother did better.
Sounds like a good plan Harry…..Buy low sell high
Harry, the “smart move” as you always like to say, was to buy an S&P Index fund in early 2009. But you didn’t do that, did you? Shorting is generally nonsense.