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

To: Douglas V. Fant who wrote (91428)	6/10/2001 7:59:12 AM
From: rails99	Read Replies (1) \| Respond to of 95453

Douglas: How do you see the flooding on the gulf coast/Houston may effect prices on NYMEX this week? Not sure if can be stopping the builds, but I would think traffic in the gulf was disrupted for days (JMHO). May get some decent trades early Monday in the patch. Regards; Rails

To: Douglas V. Fant who wrote (91428)	6/10/2001 11:08:25 AM
From: SliderOnTheBlack	Read Replies (3) \| Respond to of 95453

Doug Fant...re: "a counter indicator" ..you mentioned: - "increased dayrates for the Helmerich & Payne types of deepwater rigs..." Here's a "COUNTER INDICATOR" reality check to that comment Doug(VBG): H&P's chart: quote.yahoo.com Doug; what this chart show's is the literal recent collapse of this companies stock. From $58 to $38 over the last 90 days, or so & they just announced RECORD EARNINGS on April 25th ! - whodathunkit ? This chart is a "Cyclical counter-trend posterchild" ... ie: that the Market has allready started to discount - quote/unquote: "The APPEARANCE of peak earnings on the horizon" - and who said this originally (VBG)? - ..."remember; it is NOT as many oilpatch bulls think; the "ARRIVAL" of peak earnings & then a resultant move into reporting negative comps that causes cycle collapse... it's the APPEARANCE of peak earnings on the horizon, not the arrival of negative sequential earnings that usally triggers a cyclical rollover for shareprices". This is the biggest mistake the Oilpatch Bulls are making here imho. Two things drive the market: FEAR & GREED... Right now; the Oilpatch Bulls have more greed than fear. That's why they've ridden these stocks like HP down so far. They see the still record earnings, they see still historically very high combined Oil & Gas Prices & they hold... they hold as APA & APC fall from $75 to $50ish, as HP falls from $58 to $38 and sector bellwhether - SLB from $88 to $60. I learned my lessons in the "June Swoon" OSX collapse into the summer of 1998. It only took me one time to be burned - to learn "fear" and RESPECT for Cyclicals... the keyword ONCE AGAIN being "cyclicals" - as they can & do rollover at an alarming rate into still positive underlying fundamentals all the time... the cyclical nature of this sector should ALLWAYS induce a degree of fear here; but the Oilpatch Bulls think that we're in a new paradigm here & that these have become growth stocks...and they're trading & holding them as growth stocks, not cyclicals... WRONG ! Doug; the question the Oilpatch Bulls need to be asking is not whether dayrates are still rising, but how much higher are they likely to go & how far out until we reach peak dayrates ? ... and is/has the market allready begun to discount that ? ... once they do; they rarely reverse trend by the way. **************************************************************************** Let me use RIG, which is a classic late-cycle bellwhether stock; as a textbook example here on how to play cyclicals & the OSX stocks. The OSX peaked in Oct 1997 in the last OSX cycle; but RIG's earnings didn't peak untill Q4 1998 - nearly 15 months later ! RIG peaked at $58 in OCt 1997 as the OSX peaked at 140. During that Q3 of 1997; RIG earned .38 cents for the qtr. The OSX pulled back in the winter of '97/spring of '98 to the OSX 80 range and then mounted a March to May spring rally in 1998 (much like what we've just seen this year in the OSX by the way - Deja Vu anyone ?) to OSX 120. RIG then put in a cycle double top at $56 on May 13th 1998 at OSX 120 (again very Deja-Vu esque here !) RIG on that "double top" in May earned .69 cents for Q2 1998. From that "double top" put in at May 1998; RIG rolled over with the OSX and collapsed from $56 in May to $24 by September 1998; literally getting "cut in half" in a little more than 90 days.... BUT ! - all the while RIG got cut in half - it's earnings were RAMPING ! RIG's earnings RAMPED from .69 cents at it's double top in May; to .92 cents in Q3 and $1.02 in Q4 - while it's stock collapsed in half ! Both RIG & the OSX made their high; literally 15 mos. before the peak in RIG & the late cycle OSX co's earnings were put in. Anyone who exited the OSX in OCt 1997 and called a top there; was ridiculed for missing the boat... that ALL the upside remained to the cycle, that companies earnings were going to continue to ramp etc.... Hello (VBG) ? ... that IS Deja Vu all over again; now isn't it ? Who would have thought that taking 75% of one's OSX Dollars off the table in Aug/Sept of last year would have been the OSX top ? I did; that's exactly what I did into that same tirade of - "you sold too early", "companies earnings are just beginning to move", "it's different this time" etc... I learned from history. I learned fear AND respect of cyclicals. I learned how to play cyclicals and win. I also learned that this sector owe's me money in both directions; long & short and as I've been pounding the table on: THE NEXT BIG & EASY MONEY TRADE IN THE OILPATCH IS GOING TO BE - NET SHORT ! .. and it wil be into tirade's of - "you're too early" , "you're insane, you're going to get killed", "the cyclicals just beginning", "OPEC will just cut production", "it's a new paradigm", "didn't you see Simmons & Co's report" etc... Same stinkin'-thinkin' - same results. To win this cyclical game; one must be early... very early in the opinion of the majority. You must go against the grain & you must be boo'd, chastised & run off the thread when you both exit and take profits and also when you begin to short... by sheer definition you must be early & in the vast minority to win the cyclical game; it's really just that simple. ... bank on it. Those that sold RIG in OCt 1997 when they earned .38 cents for the qtr got out at the top in the last cycle. Those that stayed in to ride the still ramping "fundamentals" and waited for the arrival of either peak earnings, or negative comps and who didn't look out far enough on the horizon; watched RIG's earnings nearly triple over the next 5,6 qtrs; but also simultaneously watched RIG get cut in half as the cycle collapsed into still ramping earnings & dayrates. YOU MUST BE EARLY ! YOU MUST BE IN THE VAST MINORITY ! YOU MUST BE CHASTISED, CRITICIZED & VILLIFED... or, you're definitely too late (VBG). ******************************************************************************* Let's look at where we are right now in the OSX: Does sector bullwart SLB look like anyone see's a new paradigm in energy ? Do refiners getting PE's of 4 x this qtrs earnings look they a new paradigm has arrived ? Does OSX 120 here today... nearly the same damn level as we arrived at 15 mos ago for the 1st time in this cycle; look like anyone is assigning any significant premium to either a new paradigm, or an expanded continuation in this cycle in both time & dayrates/earnings ? Doug; in all sincerity I think the Industry people - who by the way; are selling their insider holdings to a degree never before seen; are saying one thing & doing another... Shouldn't we expect them to "talk a good game" ? Isn't it human to do so ? Don't people allways whistle when passing by the graveyard ? Personally; one major stat I look at is whether the Oil Majors are putting their Cap EX Spending "money" where the Markets "mouth" is... and they are NOT. Cap Ex spending was less than 42% of cash flow here... that is under historic norms. I think Smart Money inside & outside the industry see's and KNOWS that a slowing global economy AND rising Oil AND gas supplies is going to bring commodity prices down sooner & lower than most expect and end this cycle sooner than most expect. Untill BOTH the global economies improve AND the supply trends in oil & gas strongly reverse trend; there is absolute zero reason to be bullish here in the patch... Neutral ? - maybe, at best. Bearish ? - probably; especially in early cycle niche's & on a technical trading basis imo. The only short-term positive caveat here is IRAQ. ... and the keyword there is - "short term". Yes; Iraq could trigger a nearterm reversal in supply builds; but that is a "trading event" - which actually imho; will be a shorting opp on any resulting upside if seen, not a LT bullish opp; as any chages in Oil prices & supply levels that Iraq brings will be a short term factor. Iraq does NOT change the slowing global economies... with the keyword there being "global" - as all the Oilpatch bulls also seem to forget that all it took was an "Asian" slowdown to end the last cycle & now we've got the entire global community participating in this slowdown & if that doesn't induce FEAR - nothing ever will for the bulls... I honestly think that in most cyclicals & certainly within the Oilpatch; that one literally must ALLWAYS - exit prior to the arrival of , or into near euphoric fundamentals - ie: $35 oil last fall at OSX 140 in early Sept, $10 NG this winter as the XNG peaked in the last days of Dec - just as this thread called it, or prior to, or into the RECORD EARNINGS of a HP, or FTO of late - or the Nat Gas E&P earnings of the last couple of quarters...and most certainly; you must exit before the peak cycle earnings in late cycle OSX co's begin to come in. RIG peaked at qtrly earnings of .38 cents on the last cycle and 5 qtrs later as it's earnings nearly tripled; it was half it's value... whodathunkit ? So much for the fundamentals huh (VBG)? The smart/far sighted approach to playing cyclicals virtually guarantee's that one is going to be in the vast minority sentiment & thread-popularity-wise (VBG) and that one must be willing to be a bit EARLY on both an exit on the long side & an entry on the short side. Also imho; if one is a true cyclical player that lives & breathes the Oilpatch 24 x 7 - you must have the mindset that you are entitled to making money in both directions - on both sides of the cyclical slope...both long AND short. ...that's my "counter indicator" spin anyway Doug (VBG). PS: ... glad to hear your comments here - even though I, or others here are a bit neutral, to bearish on the patch; we've allways appreciated & respected "your" comments... Thanks again Doug.