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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: The Ox who wrote (80479)	11/30/2000 11:59:13 PM
From: cnyndwllr	Respond to of 95453

Michael, <<Rising Energy, Slowing Economy>> Your article is timely. In my county here in Ca. the local news just reported that a local paper producing company is shutting down indefinitely UNTIL NATURAL GAS PRICES DECLINE. The mill reported that their prices are three times the national average and they are not competitive at those prices. They employ more than 400. My best friend works there and I'm sure he won't be spending a lot this xmas. I was contemplating making a big bet on tech stocks. I think I'll wait. Ed

To: The Ox who wrote (80479)	12/1/2000 1:47:31 PM
From: SliderOnTheBlack	Read Replies (3) \| Respond to of 95453

re: Marshall Adkins comments... This sounds like May-June 1998 Deja Vu all over again.... Adkins comment below - that $10 Oil if seen is "not a big deal" is assinine & ignorant. This guy is a MORON if he believes that... his quote: <<"And I don't think anyone is drilling oil wells assuming oil will be above $25 forever. So, if it came down $10, that's not a big deal. It isn't likely to change anyone's drilling plans. So you have a pretty big buffer between where drilling will slow down and where prices are today. So even if you consider oil in the mid-$20s and gas around $3, many of the exploration and production companies are trading at historically low multiples. And, if you plug in $6 gas and $30 oil, many of these companies are trading at only one or two times their cash flow. ">> You know; this continual reference to the "historic average" multiple of 5-7 times cash flow - is something I've never seen as being average - in the last two Oil cycles ? It seems more realistic to me that the E&Ps sell at 2-3 times cfps and only reach 5-7 times cfps on an individual basis and only on the uptrend cycles of commodity prices; they don't maintain those multiples at the top, let alone on the downard cycle - regardless from what levels we begin to fall from. Only if we truly are only at the end of year # 2, in a potential 5 year Major Oilpatch expansion Cycle; will we see 5-7 times cfps across the board for the E&P's. We would have been much, much better off if we had slowly climbed to $28ish Oil and $4.50 Nat Gas here versus $35 Oil & $6+ Nat Gas - which no one views as sustainable. In prior environments when the "non-believers" viewed commodity prices as having peaked and attained unsustainable levels; they sold out of the sector completely; which took us longer & took us lower; than most expected. I am not so sure; that in this "modern" environment of Global Central Bank intervention in currencies, commodities and markets; that multi-year cycles are going to be the norm. I think these 2 year-ish cycles as we saw in 97-98 and may be seeing here for 99-01; may become the norm. I added a few OSX calls today; but no common stock; took a little off the table on the XAU breakout leaders in taking some NEM/HM off the table and rotating to laggards DROOY, GOLD & PAAS in XAU gold/silver stocks. I think it's now clearly apparent; that taking significant profits at OSX 125ish & using trailing stops down thru 115ish; was a better way of playing - "this situation" than riding the OSX all the way down to sub 100 here and now adding more stock. - those that sold & got stopped out; allready in essence have the next "bounce" to OSX 120 in the bag... This is a tough call - strong underlying fundamental arguement for a strong 2001-2002 in the Oilpatch exist; BUT ! - all bets come off immediately if the US Economy shows negative economic trends in the next 2-3-4 months and I think the Gateway, the Raytheons, Daimler Chrysler with their massive layoff & production cut announcement and all the Xmas retailers, in addition to all the other recessionary indicators; are pointing to that downside. The risks that are building within the financials also point to continued unrealized risk within the broad market. Certainly a tradeable rally here is possible, if not probable; but so few sold and took profits here in the OSX 120's +; that buying here has to be limited for the vast majority of Oil investors and once again; they would allready have the next potential "rally" in the bag if they allready sold. I'd rather wait for a true capitulation - OSX 80's before making any significant re-entry. There is NOTHING that is going to take the OSX to new highs anytime soon here; NOTHING. Even though I have significant cash & very limited exposure here; I think shorting a winter-weather related spike is a better risk vs reward play; than calling a bottom at OSX 100; for potentially at best - playing a 100-115, maybe 120 bounce -> which is nothing new, or attractive as we've seen 120 come & go many times since this spring. I prefer to play it with calls; again limiting & defining downside; but maintaining some upside "leverage". I'd rather wait for that real final capitulation buying opp if seen; of an OSX 80ish level - and ONLY after seeing some indications that the external events are settled and no longer cap the Oilpatch's fundamental upside; and that the US Economic indicators show a reasonable soft landingas probable. Making any significant bets prior to settling those issues - is gambling and not an attractive risk vs reward play; not when the Oilpatch doesn't control it's own destiny here. I don't plan on making any major bets; until the Oilpatch DOES, once again - control its own destiny... Then & only then; will the still very attractive underlying fundamentals be worth betting on... not before. RE: RECESSION 2001 ...per the earlier comments by (Winkman ?) on the Auto Financing layoff's - Daimler Chrysler's just announced a 20% production cut for 2001 and massive layoffs. This Xmas retailing season is going to lead to another "reality" check and the endorsement of: RECESSION 2001 ... we've all seen what happens to Oil Prices during any economic slowdowns... and it does not matter from where we fall; only that we've begun to fall . As Big Bull said - the cure for $35 Oil - is $35 Oil. The pendulum overswings in both directions... and that "overswing" level serves as both the entry & the exit points of a cycle... ask yourselves; which one we are closest too ?