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Real Wealth #158 03/04/2008 Short term peak in the price of oil -- despite the frenzy and speculation
Dear Gold & Energy Advisor, There's always a short, medium and long term aspect of trading any financial market. In today's oil market we really have to keep this dynamic in mind and not allow our long term view that oil is heading to $150 get in the way of the present supply demand picture. In this morning's Wall Street Journal there's an excellent article on oil that includes the following paragraph... It's been this reality that has persuaded me to initiate some covered calls on our model portfolio recommendations. As my updates have indicated the supply demand picture short term for oil isn't as bullish as the $104 recent high would lead you to believe. The fear premium appears to me to be at an all time high. ----------------------------------Advertisement ----------------------- ----------------------------------------------------------------------------------------- Over the past few years the fear has been driven by weather, terrorism and military conflict. In recent weeks the prescient fear has been over the declining dollar. Investors and speculators have been running into gold, energy and commodities in recent weeks in hopes to sheltering against the falling greenback. The fear and paranoia on Wall Street has yet to reach the kind of fever pitch that knocks 500, 600 even 700 points off the DOW in a single day. We've been declining steady from the historic high last October with sell offs and small rallies that have the DOW down 7.49% since the beginning of 2008 and down 13.54% from the peak. While the definition of a "Bear Market" is considered a 20% decline in the Dow you have to keep in mind that many of the indexes including those in housing, financials, consumers and technology are all already officially in bear markets. The only thing holding up the Dow Jones right now has been the considerable number of multi-nationals companies that are benefit from the weaker dollar. It's our view that the Dow will play catch up and pull back. This of course not to say the Down won't rally. We expect short term rallies to occur. Another emergency rate cut of a ½ even ¾ of a point could easily send the Dow Jones up 500 points. Which is exactly, what I'm driving towards -- in the issue of Real Wealth, any rally that takes place in response to further interest rate cuts will give us a delicious money making opportunity. An opportunity best played by using the leverage of options. My Gold & Energy Options Trader is producing really solid results and my options team will be looking for opportunities to short the Dow and S&P on suitable rallies, so in essence the service goes both long and short with energy, precious metals and broader market index plays capable of producing profits of 20%, 30%, 40% even 100% in a matter of days. If you have not subscribed call today (1-800-819-8693 or 1-561-750-2030) and take a 30FreeDaySubscription and if you decide to stay on board we'll charge your credit card just $225 a month. $50 oil price used to figure the valuation of a $1.8 billion oil reserve deal! Last year Anadarko was widely criticized for paying $20 for proven oil reserves in two major purchases. We liked those deals even though Wall Street analysts were critical because when you figured probable reserves the cost really looked more like $5 per barrel. Now Anadarko has sold oil reserves for 10 times that price. StatoilHydro is struggling to replace declining oil production from maturing fields off The Norwegian group said it will pay Anadarko $1.8 billion for the assets plus a "maximum pre-tax value of $300 million related to the Peregrino field to be earned by 2020 conditional on future oil prices above pre-determined thresholds." "We consider this a strategically sensible and reasonably priced deal which increases exposure in an area of technical strength and brings material resource upside beyond 2015," Citibank analyst Mark Bloomfield said in a note. StatoilHydro's international chief Peter Mellbye revealed an oil price of "somewhat below $50 per barrel" -- or half of the market price -- was used in deal calculations. I like Anadarko for the long term and will be looking to jump in with a new buy recommending on a pull back in oil — with both stock and some judicious options recommendations in Gold & Energy Options Trader. More worries about If you have not read my latest issue on increasing threat of a China $ Black Mail you should do so at your earliest convenience. Sincerely, James DiGeorgia Please see risk disclosure link below. |