Saturday, August 16, 2008

A New Cold War???

With the recent Russian offensive against Georgia, we are hearing about a potential new Cold War and I think that is exactly where we are headed. Everyone knows that Putin is still in control in Russia and his popularity comes from Russia's economic growth under during his tenure.

I believe that the difference between this oil price crisis and the oil crisis of the 1970's is that we have realized that we must do something about our dependence on foreign oil, even if prices decline rapidly in the short-term. We should and probably will open up domestic drilling like never before. I get so sick of hearing people like Alan Colmes sit in their network seats and tell people that increased drilling in the United States will not impact prices. That is utter BS. If we announced that we were going to open up ANWR on Monday, it would have an immediate impact on the price of crude. If you believe anything else, then you have not been watching markets for very long!!! The price argument aside, why would we buy oil abroad and transfer wealth to our enemies when we can drill on government land and increase governement revenues? WE NEED TO DRILL AT HOME!!!!!!!

For those of you that have emailed me questions about my RIG pick, I still like the stock and would use a $119 stop. I have said that I believe that this company can make good profits with oil anywhere north of $80 per barrel. Now throw my price target out and ask yourself this question "Given all of the events in the oil markets in the past 24 months, do you think we are going to drill less in the next 36 months? No way---so as long as we are drilling demand for the services of companies such as RIG and NOV are going to be very good. Further ask yourself the question "Is a potential cold war renewal going to reduce oil prices given the amount of oil and natural gas that Russia controls?" AGAIN THE ANSWER IS A RESOUNDING "NO".
Finally, ask yourself the question, is global demand going away? AGAIN "NO"!!
Volatility in the oil markets is guaranteed and money management will be job 1, but if you pick your points and focus properly, you should be able to make some good money in these stocks.

I was interviewed on "The Friday Market Monitor" yesterday and was asked what my general sense was on where the markets are headed. My comment was that I am basically in neutral mode. I think we are still in a bear market, but I think if McCain begins to gain in the polls we could see some pockets of strength. I don't think the markets are going to look favorably on Obama's plan to increase taxes on corporations, especially given where our economy is at the time!!

I am looking at several companies, including some that are good short candidates. I will have updates throughout the weekend.