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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: The Ox who wrote (72161)9/1/2000 1:51:06 PM
From: BigBull  Read Replies (1) of 95453
 
Micheal, yes demand v reserves is also an important question. There is quite a bit of debate on the subject of reserves, as you know. Ultimately, only time and a lot of drilling will answer that question. However, I think that the last several months have revealed the production capacity problem in stark relief.

I think it very clear that if world economic growth is to continue at even a 4% growth trajectory that there is barely sufficient production capacity to meet those needs, especially if countries like China and India are included. So, something must give. Either new production capacity is added or growth stalls out to lower levels. I like my analogy of Pattons tanks stalling before the Rhine due to lack of gasoline.

So I guess the big debate now is will the producers increase capex to the degree that will allow for increased production. My bet is most definitely YES. Recent indications out of the middle east clearly signal a major up cycle in capex for all OPEC country's is in the offing. I'll post some stories wrt this phenomenon soon. If I am right in this regard, how should investors place their bets? Is the current valuation of services stocks even remotely discounting this fact? Is '97 the proper benchmark for valuations, given this fact? OR Is '78 more like it?
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