Me? I’m looking to buy more cars from the 70’s.
And the long long run return is -100%
Who said anything about getting the bottom exactly? If I leave a few cents on the table, I’m OK with that.
I’ll do you one better. I’ll post in this thread when I buy shares, with the ticker symbol and price paid. When I sell, I’ll post a follow up.
Why on earth wouldn’t you? If you have an iron-clad money making strategy here, it would be irresponsible NOT to short. Come to think of it, it was almost negligent not to short once oil hit its peak price! Between the middle of 2013 and today, oil prices have dropped by like 70 percent. That’s a lot of money you’ve lost out on.
And in that time, Schulmberger stock has dropped 10%. Wait, if oil has dropped by 70 percent, and the value of an oil company dropped by only 10%…
It just occurred to me that you’re playing this all wrong. What you need to do is heavily leverage yourself in oil futures. There is no possible scenario where buying commodity futures for oil can go wrong… right?
It seems like when the prices turn around is a event that can be pushed by some to happen. That means some people who can play the market have the ability to influence that time and would give them an advantage in trading. Yes they are not suppose to do those things, but…
So unless you are one of these people you are at a disadvantage, not saying you can’t make a boatload of money just that some people will due to that advantage, so less on the table for the rest.
We recently had a post by somebody in the oil financial biz.
His comment was “oil is politics.” Meaning the price of the oil itself has a lot more to do with politics than it does economics. As hard as economics is to predict, politics is 10x harder. And much more prone to bolt-from-blue events that are as likely to be massively harmful to your positions as massively helpful to them.
In addition, the relationship between the price of oil and the performance of common stock of oil producers or oil industry support companies is far from straightforward.
This. I’m not investing exactly in the price of oil, but in stocks. I don’t short partly because I am an amateur, it is easier to keep things straight focusing on long positions I guess. But also, I don’t treat anything as an iron-clad money making strategy. I will invest at most 5% of my portfolio in this gambit, more would be too risky.
In whom do you plan to invest? If the theory is that the price of oil will rise when the Saudis believe they have a significant competitive advantage over the rest of the industry, then won’t you be investing in the rest of the industry precisely when it is at a competitive disadvantage?
I’m not sure yet which stocks I’ll pick. I only recently decided to try this, so I am still looking into it.
A good question. I’m not sure the Saudis are motivated by ‘competitive advantage’ as much as simply retaining their market share. Maybe the same thing, since they have the means to get their way?
I think the Saudis are at a bigger advantage now, while prices are going down because of the glut, then later when prices rebound. High prices are what brought all of these alternative sources of oil to the market in the first place- it made sense to go for tar sands, or fracking. They want the excess production out of the way, and all they have to do to clobber everybody else is to keep pumping.
Once they get their way and producers have been forced out, prices will rise and the survivors will take some time to ramp up their production again. But they will be growing again and making a profit again, which usually makes for a good investment. The Saudis won’t be able to stop them anymore unless/until a glut returns. The Saudis won’t want a permanent glut though, they are burning through their cash reserves to keep this up and at some point it won’t be worth it, see Saudis Risk Draining Financial Assets in 5 Years, IMF Says.
The final decision on which stocks to buy will probably have to wait until it is time to buy, depending on what looks like the best prospect at that time.
Got a link?
Wait for capitulation, but you should have a plan in place WRT which stocks you’re wanting, how much you’re going to spend and what price you’re aiming to buy at. The bottom could be very clouded and murky with politics and global events adding emotion to the markets and your judgement.
QFT.
More importantly, the market can stay irrational longer than the companies you invest in can remain solvent.
Even if you personally only invest money that you can afford to wait for and have an infinite timeline, that doesn’t mean the companies you own can do the same. A lot of energy companies are highly leveraged, and even if the market inevitably recovers, it’s possible that some of these will have either gone BK (or done massively dilutive equitiy issuances) before the market recovers, and that leaves you as shareholder with little or nothing to show for it.
Keep in mind that not all oil stocks respond to the price of oil the same way. Do you buy supermajors? Refiners? Pipelines? Upstream or downstream? Your choice of security could have a huge impact on your returns.
I will probably start putting together a list of candidate stocks this weekend and start doing some research into their health and prospects. If I make good progress instead of getting sucked into something else, I’ll post the list, but it will still be preliminary. Right now I am leaning towards bigger names for the sake of less risk, a couple thousand bucks each in the top 2-4 picks when the time comes. We’ll see how much cash I have…
I’m glad other people are interested in this topic. While I have done well with investing over the past 5 years or so, I know that can change quickly and ultimately that I am an amateur. I appreciate all the feedback- I probably need it!
Not downplaying your skill in investing over the last five years, but from 1/1/2009 until 1/1/2015 the S&P index rose from 929.2 to 2058.9, a 137% increase, and that’s not including dividends. With only a five year history you may have a skewed opinion of how the market works.
If you spend a half decade on the up escalator it can give you overconfidence in your ability to climb stairs.
I’m no expert investor, but isn’t the best time to buy when there is [del]blood in the streets[/del] cheap oil spurting out of the Arabian desert?
I’ve read no prediction that, e.g. Exxon-Mobil is in financial trouble. 
I’m vaguely thinking of buying some oil shares, so I’ll look forward to Comprehensive’s report. I want a stock with financial safety – I’ve already got shares of Gazprom. :eek:
I am definitely aware of that. One of my motives for changing my rules about investing in oil at all is that, since circumstances are altogether changing, I have to change my strategy. Yes, it seemed easy to ride the wave up over the past few years, especially when things were really low after the crash, and I did quite well on a % basis if not really exceptional on an absolute total basis. I was smart enough to put a significant share of my profits into a down payment on a townhouse ahead of the fed rate hike, which continues to increase in value while my old favorite stocks are sliding.
I will say I have a longer history than 5 years of making good stock picks but not having any money to invest on account of my life being a fucking mess. But yah, where is the proof then? I totally get it, and I am telling you all that I am not a financial professional, take my advice at your own risk.
OTOH, this complete wipeout in the oil industry reminds me of the last financial crash, only more focused, see Oil Investors Are $240 Billion Poorer a Week After OPEC Call (the video is pretty informative too, and I think there is a longer version of this article that goes into commodities &etc. if you look for it). I’m not any poorer, I haven’t ever put a single penny into oil in all my life, but geez, if you can invest in oil companies now and can wait a few years, you will probably/almost surely make a profit.
But the investing game is all about maximizing profits, and I don’t think the bottom has hit yet, so no money for you, oil industry, not from me. Not yet.
Reported.
I’m in a similar position, have been watching the charts and listening to other small investor’s views on oil companies. It’s ugly out there, people are just assuming their stock choices will bounce back because of their history, I nearly went in for a few a month ago and a technical glitch with my bank stopped that transaction. This last week I could’ve bought lower than I’d wanted to before - at any time in the week - and I’m just looking at the charts and holders’ comments (some who’ve been in the industry for decades) and thinking “Glad I didn’t then, or in the several years before”.
I think this is an instance, like when bank shares were bottoming, where you place your bet and recognise you might not get any of it back. 2-5% loss of total is small fry, if that doubles in short order it’s a nice win and if you lose it, it’s no biggie.