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Politics : Welcome to Slider's Dugout

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To: bearjones who wrote (14251)	1/8/2009 10:29:19 AM
From: jim_p	16 Recommendations Read Replies (4) of 50420

I feel one of the best plays of 2009 will be DXO. We're a little less than half way through the correction in oil prices. Since oil future prices are higher than spot prices and tanker storage prices are at historic lows, there is a strong incentive to sell future prices short and take delivery of oil today at spot prices and store the oil in oil tankers for future delivery. This is creating an artificial future supply of oil that must come on the market down the road and it will create a great opportunity to go long oil at prices that are well below the incremental cost to find new reserves. Short term oil projects are being cancelled at current prices and it's just a matter of time before we hit the next oil crisis and the supply declines due to low prices. I picked up a large position of DXO at 1.78 and it doubled in seven trading days. My plan is to build a large position in DXO when oil prices fall back in the 30's, but keep enough power dry in case we get a collapse in oil prices down the road due to the buildup in future supplies from the contango play in oil storage. Since the cost to develop offshore oil reserves/oil sands is in the $70 oil range it's a very low risk play, but as usual the big question is timing. If oil were to tank in the 20's, I would mortgage everything I own and buy as much DXO I could afford. Buying DXO when oil is in the 30’s is a very low risk with high rewards 12-18 months down the road. Buying DXO in the low 2’s will be a 10X return, the only question is will it go lower and how long it will take before it goes back up in the 20’s. I’m also bullish on the market for 2009 due mostly to the large amount of money sitting on the sideline earning less than 1% in money markets and treasuries. I’m long QLD, UWM and SSO. Good luck!! Jim

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