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To: Sweet Ol who wrote (92545)	7/18/2001 7:10:19 PM
From: isopatch	Respond to of 95453

Thx John. One of the strengths here - when it comes to making the intermediate and longer term cyclical sector timing calls is that the few here who've been successful at it are are strong in quite different catagories of research and DD. Often, we're not even looking at the same data sets! At first blush that might lead one to think the result would be total chaos.<g> Not so. Actually it's just the opposite. If we can conclude from different methodologies and information sources that a major trend is approaching a pivot, then the conclusion is all the stronger for that. It's also possible to cover more catagories of evidence than any one of us could alone. When I was a broker, noticed the best market strategy and analysis departments had that kind of chemistry. They built upon each others strengths and the result was clearly more than the sum of the parts. Mitchell Hutchins was noted for a lot of 1st rate work before they were merged with another firm. And Bob Farrell build an excellent market analysis team at Merrill in the 1970s and 80s. As I said to Art, there's a great deal of savvy and talent here. But just as important is the variety of personal specialties and style to make the most of each others ideas. And just as important, we have a heck of a good time doing it.<g> Good to see you drop by. Don't be a stranger, Ya hear? Isopatch

To: Sweet Ol who wrote (92545)	7/19/2001 9:33:35 AM
From: Art Bechhoefer	Read Replies (1) \| Respond to of 95453

John, if investor sentiment shows little or no interest in a sector such as oil, then a long term hold or even a buy decision can be frustrating. The cyclical nature of the oil business is tied to two phenomena. On the supply side, a period of high prices results in accelerated exploration and development activities and increasing supplies on the market that can and often do drop market prices to the point where the accelerated activities level off. This is the traditional cycle that affects not only oil but cars, paper, and possibly even semiconductors, not to mention dozens of other products. The second phenomenon comes from the demand side and is harder to monitor in terms of impact on prices and profits. If the profitability of oil and gas companies was dependent primarily on the growth in the U.S. economy, then the current slump would be expected to cause energy prices to drop. If our industrial capacity falls to less than 80 percent, as it has, then logically there are many plants that use less energy than they would if we were operating closer to the norm, which is around 85 percent. Add the poor performance of the second largest economy in the world--Japan--to ours and you get even lower industrial demand for hydrocarbons. But what happens when an 800 pound gorilla like China suddenly increases its use of motor vehicles, replaces coal fired generating plants around Beijing, and ramps up its industrial production by 6 percent (which is low for China)? Seems to me you get an adjustment in worldwide demand large enough to prevent the assumed fall in the price of crude, assuming, of course, that Iraqi oil is still subject to an embargo. That is the only factor which would lead me to change my assumption that overall world demand will continue to increase at a rate fast enough to prevent oil prices from dropping below $24 per barrel. Accordingly, I go from there in making my long term investment decisions in regard to the oil and gas sector. Art