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

To: Razorbak who wrote (85620)	1/31/2001 12:22:04 PM
From: SliderOnTheBlack	Respond to of 95453

re: "Can an OSX Boom & a Mfg -led Recession occur simultaneously" ? ... it might and that March to April/May window is now open and it will be "wide-open" if the Fed cuts .50bp later today... I think "waiting" here - staying partially invested, keeping cash for individual trading opps/anomalies etc was the right thing - as we "still" aren't any higher here than we were in Aug/Sept, and we were at OSX 120 last May... no one missed anything here by waiting for an intitial read on how the Street would react to this MFG recession, to see what the Fed would do & how the Street would react, to see a few more API reports, to see how the OSX held its trading range etc... and we were still able to pluck the middle out of this rolling trading range since Sept and there were more than a few nice long & short trading opps. The other question, perhaps more important and relevant; is can the US enter a Manufacturing Recession and not have the entire economy pulled into a recession ? ... add to that; can 40% of the US consumers inherit in essence a "Winter Heating" negative windfall tax via these skyrocketing heating bills; as well as shoulder a Rust Belt MFG recession led by massive mfg layoffs and not pull the rest of the US into a Recession via their collapsing spending AND confidence ? ... we will very shortly find out if indeed we have entered into a technology & service economy. PS: Trading the traders works both ways. You can trade them when they are right and when they are wrong - it's knowing in which direction they are going to move that matters; not whether they are right, or wrong. Right now; there is simply one hell of a lot of cash being thrown into this market and one hell of a lot of OPM being thrown at co's that have negative fundamentals. But,the Fed does have the ability to nearly "buy" its way out of a recession (but, not without future negative ramifications) and it is now obvious that they are going to do just that. The manufacturing-led recession is underway; but we are in the denial stage about it's ripple effect that won't be seen untill late 2001 and presently; it's all about Fed rate-cut euphoria. Much of the market is discounting this downturn as a 1-2 qtr event; that the Fed can manage out of and they are simply looking through and beyond it. Is this a mistake ? ... first; it doesn't matter 'short-term' & that is where the "Trade the Traders" opp exists & it opens the short term window for yet another March to April/May OSX run if the Fed cuts .50bp this afternoon. This gives us a great trading opp here imo - as the negative news that "may" ultimately prove this euphoria & prevailing attitude that is minimizing the eventual negative ripple effect that both this Winters heating bills will have on consumer spending & what the layoffs & mfg cutbacks will have on the economy;will not hit home untill mid-late summer. As such; the light is green imho; for an Oilpatch run here. Personally; I've done something I never thought I'd do in this environment.... I MARGINED ~ ... yes; I have leveraged, but done so in laggards that are in the midst of a very clear back & fill mode here as the OSX bases here at 115-125 for that March to April/May move that we've seen now 3 years in a row. I've traded PGO between that 14-16 & 20 range for some time; it's allways been a disappointer of late at earnigns time; but because seismic spending has lagged by about 6 months in this recovery. But.... things are changing and one of the sharpest professional traders I know - has accumulated a huge "Call" position in PGO. Check out the open interest of calls vs puts for PGO and look at the open interest in Feb $12.5's and the May $12.5's & $15's... that ought to open your eyes. And this "call" activity wasn't based upon PGO being an obvious potential "laggard" bounce play bet - this is a knwon "activity, bid & inquiry" bet on what is happening now - that wasn't happening during Q4. This was an informed "bet" that has been heavilly leveraged via those Feb & May calls in PGO. I just went 50% into available margin; with PGO now encompassing 40% of my total portfolio (and I don't recommend that to anyone else - I am highly aggressive here - having allready taken the bulk of my funds out of the market in Aug) and all of that new margin interest. I love the offshore drillers as the best subsector and added RIG & DO as laggards here, bought some PKD at $5 for my first "real" position in PKD in ages, own CAM from $56 and some calls; it's my fav' LT service play along with PGO here. I only own a few E&P's, EEX, BELW, some old TLM from $29 and a small mixed basket; with total E&P exposure just 1/5th of my driller/service position. I still see a "net short" move later this summer/fall for the E&P leaders as they will face negative comps and there is simply no possible way that the momenteum names in E&P land move higher into lower Oil & Gas and eps/cfps comsp - no possible way. As such; I only like laggards, exploration plays, financial turnaround stories, or blatant valuation laggards here in the E&P's - NOT the mo-mo names in E&P land. I still have 35% Gold/Silver and the US Dollar will be "walked" down - it has to; to lift US corporate earnings out of a recessionary environment. Japan's weaker Yen will kill US Auto Sales; the US must lower the Dollar in a Manufacturing Recession and we are in a "manufacturing" recession... now whether the manufacturing recession pulls the US economy as a whole into a prolonged recession is yet to be seen; but a weaker dollar will help Gold and I like Gold/Silver as both a hedge and as a value play here. I think much of the tech move was not fundamentally supported, but there are trading opps out there - I added ADCT an edge of the network, strong balance sheet broadband, dsl & telcom/network equip play... new CEO aboard & technically looks bottomed, own some CSCO & INTC here along with a toe dip that I made into FDRY on their earlier blow up... Just 7-10% tech for now; but there are some great shorts coming at 3250-3500 and/or if Greenspan can't print and give away enough Easy-AL Dollars to buy our way out of this downturn. Multiples are still to high; but I'll take a bounce to $60 in CSCO... didn't miss much by waiting here... using tight stops and watching for short opps as well. XOM upgraded today was a positive indicator. Razor I agree that XOM's downstream interests don't make it a proxy for OSX strength; I've mentioned a few times that few realize that XOM is a "net buyer" of Oil. As such; its obviously not a direct proxy for OSX stocks... but rather that for many non-energy specialist Institutional Investors; who don't play many OSX stocks other than maybe SLB becasue of mkt cap & liquidity; they view XOM as a proxy for Oilpatch investing and with XOM just making more money than any company in the history of the world last qtr and being nearer to its 52 week low, than it's high - that worried me... the upgrades and a move back to $90ish will endorse the March to April/May OSX rally window imo and that non-energy speciality Institutional Investors are still willing to play the Energy story. - my thought is that the "Energy Story" ie: the XOm story, must still be viable & alive in the Institutional Mindset for the OSX to go to new highs. Anyway - the reasons on my margin/lever PGO move: #1. The tip from the shaprest professional trader I know in Oils on that huge position/ buy of PGO Feb & May "call options". #2. It's perrennial late cycle nature; but its continual deleveraging of the balance sheet - ie: the Spinaker Exploration sale & the HAL asset sale - when things turn, cash will flow to the bottomline. #3. Fundamentally - its the cheapest "name" discussed here on this thread - a little known fact; it will produce more cash flow per share than nearly all OSX stocks and in 2002 may produce more cfps than SLB; with only SII & CAM having higher 2002 estimates in the service/mfg sector & RIG & ATW in the drilling sector. PGS is a cash flow cow - it also has the ability along with VTS to accelerate cfps & eps faster than ANY other service, or driller component and that huge "call option" bet for Feb & May is on that acceleration potential. #4. FPSO's.... Bush/Chaney's policy will endorse FPSO's in the GOM... when, not if & PGO is well positioned. #5. sheer market multiple laggard status; even with lowered 2001 eps guidance; now only 9-11 x lowered 2001 eps guidance & only 5-8 x 2002 eps estimates. PGO has the LOWEST combined cfps/eps valuation multiple assigned here for 2001-2002 of any serive/driller name. #6. the Technicals.... OBV, Money Flows have turned off the bottom; technically looks bottomed on every metric - 4 year price low etc. The first blow off to $10 was on the expectations of the miss & the stock quickly rallied to $14 as a laggard play and now the final blow off to $8.40 here on the actual "news" was on fund capitulation for those whose models require forced selling on any misses... The stock is totally washed out here and has less than 20% institutional interest ; allowing tremendous upside when they return & they will... PGO is a laggard posterchild here, it's profitable, its a cash flow cow, it has as much eps & cfps acceleration ability as any OSX stock and it's a helluva DCB/laggard play that is also fundamentally supported and it's outlook for the 2nd half 2001-1H 2002 is accelerating. PGO is "THE" trade here imho and in my finest "JQP-esque" fashion I have "MARGINED" the hell out of it here... hey, Vegas aint far away... literally ~ and this is very arguably a high reward/low risk bet here at a 4 year low & very technically AND fundamentally supported & much of the broad market risk has abated as well (for now). PS: check out the "put sale" returns on PGO puts, lots of strategies/plays on this one, calls, sell puts, margin-lever.... just do it ~ GLBL & MVK and a few others have given us these "glaring" DCB leveragable trades of late & this one may be the best & quickest 30-50% (60-100% on margin) trading opp yet... BWTFDIK ? See ya all in Vegas & I will be bringing my PGO $$$$$$$$$$$ OSX 150-165 & let's Party ~