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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Doug who wrote (71387)	3/6/2001 2:59:03 PM
From: jmootx	Read Replies (1) \| Respond to of 99985

Energy is still a buy, but Right now getting hit by the rate cutting environment. The last five years energy has been really rate sensitive--gaining in tight cycles, selling in loosening cycles. This was compounded in 1998 when there was a one time major glut in supply and Greenspan went to cut rates to save LTC, etc. Another problem that hurt the energy PE ratios right now is employment. Even though there is demand, the workers laid off in 1998 have moved on and were absorbed by the 3.9% employment picture. An inside contact familiar with operations said drillers were literally waiting in line to get ex-cons to go to work as soon as they could get clear with parole issues. Some companies also made some bad bets on hedging the price and cheated themselves out of major profits. Also the refining capacity is way behind demand, giving many the impression there is really a glut on the other side. We went from a complete fear of no oil come year 2000 in 1979 to irrational glut forever in 1998. I like you see energy prices remaining high, and once Greenspan is perceived to go back to neutral on rates, I expect the stocks to rally hard. OPEC will remmain vigilant. The only time OPEC has not been a force has been war issues--The U.S supported Iran-Iraq War from 1981-1989 (where we armed Saddam in a big way for oil), then the Gulf war where we trumped Saddam and forced the rest to give us capacity. So peace in the region will produce high price oil if history plays out.