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Strategies & Market Trends : Strictly: Drilling II -- Ignore unavailable to you. Want to Upgrade?

To: SliderOnTheBlack who wrote (4411)	11/26/2001 2:07:32 PM
From: Jacob Snyder	Read Replies (1) \| Respond to of 36161

My take on OSX next year: In oil services, like other deeply cyclical industries (like semi-equip), timing the cycle is much more important than picking the right stock. My current thinking is that the downturn in oil services (measured by oil/gas prices, and rig utilization rates) still has a ways to go, and probably won't bottom till well into 2002. The Russians are making a profound strategic move here. They want to align themselves with W. Europe and the U.S., and they want to replace Saudi Arabia as the "swing" producer for oil. Wresting control away from Saudi Arabia is not going to happen by negotiation. The market hasn't figured this out yet. The market still thinks there is a chance this is just a short-term tactical move by Russia. It isn't. In order for this strategic move to succeed, the Russians need to prove they are willing to tolerate more pain (= lower oil prices) than the Arabs can. If there is one thing Russians are good at, it's enduring pain. From recent statements, the Russian government is preparing for 10-13$ oil. Yes, their production costs are a lot higher than in Saudi Arabia. But Russia has a much more diversified economy, and a more stable social structure (compared to Saudi Arabia, anyway, which isn't saying much). Putin is making the bet that, at 10$ oil, there will be more rioting in the streets of Mecca than in Moscow. When that happens, the OSX is going to be a lot lower than today. My current plan, is to start buying OIH (oil services tracker), when OSX approaches the October 1998 lows at 45. So, 2002 is going to be just as interesting as 2001. In the coming year, there will be more days when the whole planet is watching the horror show on CNN. All through 2001, I sold into every rally, and waited for panic selling to buy back. That strategy is still going to work in 2002. You are targetting 45-50 OSX as a "no-brainer buy-in price". I'm a bit more pessimistic. IMO, any one of the following events in 2002 brings OSX to 45-50: 1. prolonged global recession, no recovery in 2H02 2. another WTC-scale attack 3. Russia meaning what they are saying, about pushing this price war to 10-13$ oil. 4. another market panic, like in 10/98 and 9/01, caused by the failure/default of a large bank/hedge fund/government. Odds are, at least one of these events happens next year. And, if all 4 happen, then the OSX goes a lot lower than 45.