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Strategies & Market Trends : Three Amigos Stock Thread
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To: Ditchdigger who wrote (8894)9/19/1998 7:20:00 AM
From: Phil Jacobson  Read Replies (2) of 29382
 
DD, that post by Slider is certainly thought provoking. I've also been trading out of tech for some oils of late hoping to catch them at a bottom. Where they are right now, it seems almost as good as sitting on cash with a nice potential pop you don't get in a money market. They don't look like they can go much lower but one never knows.

I do agree with Slider in general terms, ie, that there's no way Shell knows what will happen 2-3 years out, and that it's in their best interest to create low expectations. But don't discount the fact that there's a good chance Shell could be right. There could well be a 2-3 year problem if most or all the emerging markets continue to decline, or even stay at the current level. Some of these countries have lots of oil (Russia for example) and if their economies tank for 2 more years, they will upset the OPEC apple cart by dumping oil to support their economies and currencies, in addition to hurting the sector via reduced demand. Just as lot of tech companies have been burned by having to watch economies get slaughtered where 50% or more of their next growth phase was targeted, the oil sector was building capacity to support the same economies. So just like in banking and many other equity sectors, I think it boils back down to whether we get out of this international mess sometime soon, or if it turns into something that resembles a real depression. Shell did a good job getting people to think of the depression scenario (as it affects oil) as "likely" and get the expectations to be lowered.

Phil
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