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Strategies & Market Trends : Roger's 1998 Short Picks
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To: frank 3 who wrote (8827)5/15/1998 3:57:00 PM
From: BelowTheCrowd  Read Replies (2) of 18691
 
Indonesia is a major producer of oil.

ARCO and ELF are currently pulling their non-local employees out of the country as quickly as possible. Both have advised their people to remain at home (mostly in well-guarded neighborhoods) until evacuation is possible. They have been training employees on evacuation for several months, and advising them to keep supplies on hand at home.

This is not good. There isn't much of a safety margin in the world's oil production capacity at this point, and a disturbance in an major producing company will send shock waves through the world's economies.

For now, the rioting in Indonesia has focused on banks and other financial services businesses, as well as on ethnic Chinese. I would not guarantee that the next outburst doesn't focus on other foreign businesses, including the oil companies.

So: I would judiciously be buying companies in oil production and oilfield services. (I already own quite a bit in this sector) I would be very cautious about anything which is energy-cost sensitive which is most of the rest of the economy, but particularly airlines.

IMO, both of these items are just waiting games. If Indo doesn't screw up oil supplies, something else will. Our usage vs. production is still high, and historically that leads at the very least to gradual increases and at worst to a shock if something goes badly wrong all at once.

Incidentally, I'd look at US carmakers too. What happens to all those high-margin mega-behemoth SUV sales if fuel prices take off and the stock market starts to cool?

mg
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