In some ways, our stocks are indeed being impacted by the troubles in SE Asia. The Market hates uncertainty, and over the past week or so both Korea and Japan (and Malaysia) have done little to allay the market's fears.
Our thesis here has been that increasing worldwide demand for oil (with a sizable chunk of that increasing demand eminating from SE Asia), combined with equipment shortages and decreasing US oil reserves would drive revenues and profits for the drillers, service folks, equipment manufacturers and shipyards.
Worst case (and here, may I add that i am long a giant boatload of stock [and calls!] in this sector), demand not only stops growing but actually decreases in SE Asia due to lower economic activity and the negative impact of currency. I think this is what the market is focusing on until they perceive SE Asia stabilizing or, better yet, until they recveive direct data on energy usage over there.
This past week, we had the morons running in the S. Korea election saying that they would renegotiate the IMF bailout if elected!! Hello, this is not a way to inspire confidence in your currency or stock market.
However, on a brighter note, I saw that Dr. M, the PM of Malayasia, finally admitted that the problems of his country were their own fault (govt and business) and not due to the currency speculators. Also saw a piece this weekend indicating that all candidates in S. Korea election have just now promised to implement the IMF package with no changes if elected. I think either US officals (Rubin?) or the IMF or both are giving a few quiet lessons to these folks on how to restore confidence and not shoot themselves in the foot.
I certainly look forward to other opinions, especially from our perennial bull, LT. I think this sector will not move up until the SE Asia situation stabilizes. Seems like these stocks are being priced as if we are at the top of the cycle (eg, GLM has PE of 12), not in the 2nd or 3rd inning of the game.
On another positve note, any country (eg, Brazil, Columbia) whose currency has declined somewhat will be even more inclined to drill, since oil revenues are in US dollars. This means S. America, Africa, China, Vietnam, etc. should still move ahead full bore with their programs.
Finally, Thean , you would be sorely missed if you left. Your contributions have been great. This thread has had a minimum of big egos and personal attacks; let's hope it stays that way.
Good Trading
Mike |
