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

To: SliderOnTheBlack who wrote (43282)	5/2/2005 1:35:13 PM
From: ChanceIs	Respond to of 206272

Slider............ ...to survive unscathed...you merely need to realize that Oilpatch Stocks are cyclical, were cyclical and will always be cyclical. Let me respond with an example from the mechanical engineering world - chatter. You know this phenomena. You have probably run a finishing sander and leaned too hard against it, and it started to chatter - vibrate horribly. So it used to be with drilling (and perhaps still is). To pick some ild numbers to illustrate...lets say that in previous years, an additional unit of drilling produced two additional units of crude/NG production. If you keep leaning on drilling, you get huge production increases, supply surges, and price drops...in other words, chatter. Now lets say that the dynamics have changed so that one additional unit of drilling produces only 3/4 units of additional crude/NG production. There is no great supply increase, and prices will tend to rise until some other phenomena establishes equilibrium. There is no longer chatter. Are we there with crude and NG yet??? I don't pretend to be an expert...well maybe I am an expert in the opinions of experts. I don't know. Now if you argue that because we have been cyclical in the past, and that investors anticipate chatter even though the underlying dynamics have changed, and in fact we get chatter, then I would argue that eventually someone will notice that even though the OSX sold off, rig counts didn't drop. Always cyclic and always will be??? Nope. One of these cycles the chatter will stop. I don't know which one. I am shorting very tight covered calls and watching the NG and rig count like a hawk, just in case we are at June '01 all over again.