Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: CommanderCricket who wrote (41462)	4/7/2005 10:36:04 AM
From: SliderOnTheBlack	Read Replies (1) \| Respond to of 206325

re: ["you must be shorting this crazy, unbelievable run up on hype and speculation?"] Michael in all due respect. What run up ? This longerterm one ? finance.yahoo.com Or this short term one ? - We'll even let the comparison chart start right at the bottom of this recent Energy run... finance.yahoo.com As Jimmy Cramer says... there's always a Bull Market somewhere...some are just bigger than others (vbg). Is Energy really the best risk to reward play in the market today ? MeThinks NOT. I think when people become emotional about their investments & overly blindly bullish...they only hear, or see what they want to hear, or see...and miss other opportunities that are unfolding around them and more importantly; always take the ride up Magic Mountain...but, unfortuantely in the Oilpatch - become mesmerized by the market hype and completete that ride by going right over the Lemming Cliff as well. Virtually all the same Bullish posters here now; were here during the Tops in the OSX in 1997-98 and 2000 that saw rollover from OSX 140 to OSX 45 and 58 respectively. Nat Gas was no different. In the XNG...the same posters here were using the same arguements in Dec 2000...remember the rolling blackouts etc... well the XNG went from 260+ then... to XNG 105 in July 2002. Matt Simmons was pushing his Peak Oil thesis then. The Bulls were riding the same'o-lame-o' "But, this time it's different-New Paradigm" arguement then; as they are now. I don't think the ultimate ending will be any different this time...than it was then. When sectors disconnect from their underlying fundamentals...and when we see what we've just seen: Crude & Gas prices ramping near exponentially directly into inventory builds rising to near 5 year highs; along with a 5 fold increase in Long Crude Futures from Speculators just since the first of the year.... you don't stand in front of a speculative driven freight train. Markets do become Speculative driven vs. fundamentally driven. Given the Fed's money, credit and liquidity bubble... we've seen the Hot Money flow from bubble, to bubble, to bubble. Why shouldn't, or wouldn't commodities and the OilPatch be a recipient of Hot Money's most recent fickle affection ? Let's put this in proper perspective. Who was correct in their assumptions of the reality of the underlying funamentals back during the Internet & Tech Bubble at Naz 3000 ? Well obviously; the Bears were right on the fundamentals and the Bulls were Wrong. - but, the NAZ still moved from 3,000 to over 5,000. Unfortunately; the Bulls became more and more wrong on the fundamentals the higher the NAZ went...and today the NAZ sits a 50% move away from that 3,000 tradeline and more market wealth was disentegrated during the meltdown than in any other time in market history. So what did we learn from the Tech & Internat NAZ Bubble ? - Moron's can make money - even when they are dead wrong on the underlying fundamentals. - But, Moron's don't get to keep the money they made - when they are Dead Wrong on the Fundamentals. ...the key to retaining money made; is understanding WHY you made it in the first place and being able to unemotionally differentiate between fundamental & speculative driven markets. I am neither a Bull, nor a Bear on the Oilpatch. - I am a "Pig" Bulls can make money. Bears can make money. Pigs can make money & do it unemotionally in both directions. Hogs ...get emotional arising out of being too bullish, or too bearish - and always get slaughtered. Pigs are realists. The reality that exists in the Oilpatch;as I see it... Is that the underlying Oil & Nat Gas Prices have disconnected from the actual underlying fundamentals of Supply:Demand and Cap Ex spending. - that last one...Cap Ex Spending is the one that most PermaBulls here seem to be forgetting about. Lee Raymond and Big Oil haven't forgot about it. Many of the OSX Service & Driller companies - especially as the cycle matures; will cease to trade on Oil & Gas Prices and even their own underlying Earnings estimates. Go back to the 1998 OSX Cycle and study TransOceans/RIG's stock price to eps performance. The stock literally collapsed...for 6 months directly into exponentially rising earnings and dayrates on their Rigs...a near textbook perfect divergence chart. I remember writing a page in my trading notebook about that event... one which I will always remember. It was the quintessential lesson on the CYCLICALITY of the Oilpatch Stocks and how it is always WHEN and never "if" - that the stocks will not only disconnect completely from the underlying commodity price decks...but, from their own earnings, dayrates, backlog fundamentals etc. This is why the OSX lies at 140 today...with Oil and Gas prices nearly double where they were in 1997 at OSX 140. The OSX in a truly fundamentally driven market cycle - should lead the underlying commoditys...the stocks should be more levered than Oil and Gas. - but, they are not leading... they are lagging. WHY ? ...what is that telling you ? Michael; you said - "I must be shorting this unbelievable run" Well first; as I pointed out above.. it's far from being an "unbelievable run" in the stocks. It has been an unbelievable run in the Commodity Futures. The Futures Speculators get the Kudo's... not the common stock players. You guys haven't outperfomed Blue Jeans & Capri Pants... finance.yahoo.com. But... vis a vie the Oilpatch stocks: There are lots of ways to play this environement. Presently I have an options straddle in place.. lots of LEAPs. The volatility from this point where we've seen a 5 fold increase in speculative Crude Oil futures is the "best bet" I see. I will not be surprised to see $28-$35 Crude, nor will I be surprised to see $85+ Oil. ...but; what makes me different from 95% of threadsters here... is that I understand WHY we'll see $85 Crude if and when we see it... and I know what's going to happen soon thereafter if we do. If present supply/inventory trends stay in place and we maintain this unprecedented level of Speculative Longs in the Crude Futures Markets... I will probably tend to continue doing what I am doing now: Shorting each and every significant breakout Rally in the Oilpatch - and doing so via the common shares into the point I begin to see exhaustion occur and the pullback forming into a base. I will take what the tape give me; neither getting greedy, or emotional. When I cover my Shorts... I'll take 15-25% of my "profits" and buy some outlying, far out of the money Calls/LEAP Calls. Keeping a moving Options Straddle in place - but, with a short bias. On any future rallies I can take profits on my Calls and go short again...via Puts, or shorting the common. Again; unless actual supply:demand and Futures Market Speculative driven fundamentals change... I won't be buying, or holding any common shares Long.... just outlying CALLS & LEAP calls from "short profits" only. An options straddle gives me "leverage" in both directions with a defined and limited capital outlay. Bottomline: the Oilpatch is far, far, far from being the best Risk:Reward play in the market. The Big & Easy money has already been made. If I was a longtime Oilpatch Bull here... I'd be taking large chunks of common shares off the table on every rally and taking "portions" of my profits and buying some max out of the money calls for retaining upside leverage..but, defining and limiting both capital outlay and downside risk. One last chart: bigcharts.marketwatch.com Since we've begun this debate around the 1st of March... XLE, OIH, XOI, XNG, OSX...are just now coming back to even. - they've been under water, or dead money since we've begun this debate...so what's all the Pom-Pom waving been about ? ...certainly not anything based in reality ? More whistling by the graveyard than anything else imo. PS: Notice the volume in that chart has been on the downside selloffs... Tic' Toc`