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Technology Stocks : Intel Corporation (INTC)
INTC 36.20+0.1%Dec 26 9:30 AM EST
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To: GVTucker who wrote (182614)11/23/2005 10:20:50 AM
From: Wyätt Gwyön  Read Replies (1) of 186894
 
As it is, over a full cycle returns in the oil and gas business are much lower than most other industries.

that is the conventional thinking, and the reason why people who have underweighted energy have underperformed the last few years. after all, you'd have to be insane not to invest in a sector that's trading at a huge market discount even as it has the best fundamentals...unless you thought it was all unsustainable.
the assumption is that everything is business as usual (i.e., huge cyclical downturn in process). it's the only way to explain the chronic underpricing of the energy stocks. but there's little reason to think that this assumption is valid. prior price spikes were brought on by supply shocks. the high prices preceding the hurricanes had nothing to do with supply shocks. it is just there is not enough margin between supply and demand, so a small shock causes big price moves.
if global supply is indeed peaking then the old cyclical rules do not apply. just look at OPEC--as recently as last summer they contended that $28 was their long-term upper limit. people were expecting a huge wave of oil to lower prices and get Shrub reelected. didn't happen. nobody's in control anymore.
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