Strictly: Drilling and oil-field services Message Board

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Gold/Mining/Energy : Strictly: Drilling and oil-field services

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To: The Perfect Hedge who wrote (8657)	1/18/1998 2:14:00 AM
From: Erwin	Read Replies (1) of 95453

Logically Speaking??? I have sat on the sidelines and read this group for a long time and now I would like to get my two cents in. I have been reading SI for a couple of years but I didn't discover this thread until last August. I saw everyone write about the wonders of oil service stocks and you couldn't swing a dead cat without hitting a bull in the face. Then the Asian Flu hit and massacred a bunch of folks, including me. After the group reeled under that the price of oil began to drop. The bulls kept shouting that oil prices had nothing to do with the value of drilling stocks but the stocks kept dropping, the oil prices kept dropping and the bulls kept shouting. Finally the drilling stocks were coming face to face with their 52-week lows and out of desperation the bulls gave up. The new battle cry was sell everything and start buying long-term options. Now I hear rumbles about things going too good and the rally, if there is one, being short term. So, the current strategy is to short the stocks as soon as they recover. Hey folks, we just turned 180 degrees! Will the earnings euphoria supply a short run up and then run out? Who knows? What about the current Saddam temper tantrum and will it cut off his oil exports on a deal that is only three weeks old? Who cares? The price of oil isn't a main driver for drillers and actually cutting off Saddam's exports isn't the main driver on future prices. Impressions and opinions drive future prices. So, if Saddam keeps cocking off and the futures market takes notice, the price of oil is going to rise whether Iran exports oil or not. If the price of oil rises it will reflect well on the price of drilling stocks whether it is a profit driver for them or not. This is not a time to get logical. If logic had anything to do with this market these stocks would be trading at twice their current price. I agree with buying long term on options and I think in-the-money calls today will be worth a fortune in August. I also think there is merit in the idea of shorting this rally close to the peak as long as you don't get caught in a sideways slide by folks like FSESX and then find lower was not in the cards. It is my belief that no matter what tactic you use in this sector the long-term trend is up. I am a believer, no matter how innocent, that the earnings growth will pull money out of tech's into this sector. The problem is that it is a matter of time and my crystal ball fell on the floor and broke in October. Erwin

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