# How will we know oil has bottomed?



## Pluto

some thoughts on that from talking heads:

Cramer, "when they can't pay". When who can't pay? Oil companies that have too much debt and can not pay dividends, loans, bond income. Countries that rely to heavily on oil for social and other government programs. 
Another one from Cramer's technical analyst guest: rebounds in oil price during the slide have been > 6 and < 7 $. The slide will be over when there is a rebound > $7. 
And yet another view: Futures contracts are still lower. the slide will not be over until futures contracts are for higher oil. 


Thoughts? opinions? perspectives?


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## newfoundlander61

I think you will see some Chapter 11's and buyouts before it settles down.


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## AltaRed

When the earlier of: 1) OPEC calls an emergency meeting and formally cuts production, or 2) when global (mostly North American tight/shale) oil production falls off enough to bring the market closer to balance. The latter does not depend on oil companies closing their doors but it does depend on capex spend being pulled back enough to see a material, e.g. 1 million barrels/day of production decline. 

I don`t know when that is page 31/32 of http://www.gibsons.com/Gibsons/media/Investors/Presentations/2014-12-GEI-IRDayPresentation-WEB.pdf might tell us something. Of course, that chart does not provide any information on the Cdn/USD forex assumption nor assumed WCS discount to WTI.


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## Rusty O'Toole

Oil dropped to $11 and change in 1997. I remember it drifting lower for months then flatlining for a long time before it started up again. I was impatient and missed the rise because I got bored and distracted *squirrels!*


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## gibor365

Rusty O'Toole said:


> Oil dropped to $11 and change in 1997. I remember it drifting lower for months then flatlining for a long time before it started up again. I was impatient and missed the rise because I got bored and distracted *squirrels!*


 nOR REALLY  IN 1997 oil never dropped below $16.20... it dropped in 1998 in December to $8.64 and in 6 months price doubled


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## My Own Advisor

I wish I could say I would know, might know, think that other folks know including all the talking heads combined but I don't. They don't but they can certainly guess.

I do know as part of our investing plan that as the market falls, and as O&G stocks fall in price, like the SUs, CNQs, COPs, XOMs, COSs, BTEs, etc., I think the lower they go the better is it for investors seeking to own these companies directly or indirectly via an indexed fund long-term.


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## Spidey

Of course there is no way to know. How I'm playing it is nibbling at certain plays that I consider can better whether the storm and investing more if the price drops significantly. Unfortunately this means higher trading costs but in this environment a drop in stock price often significantly outweighs the $9.99 commission.


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## Rusty O'Toole

gibor said:


> nOR REALLY  IN 1997 oil never dropped below $16.20... it dropped in 1998 in December to $8.64 and in 6 months price doubled


I told you I got distracted. Remember watching it for a long time waiting for a bottom, giving up and doing something else, and missing when it took off. It was down to $11 and change when I gave up watching it.


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## cainvest

Spidey said:


> Of course there is no way to know. How I'm playing it is nibbling at certain plays that I consider can better whether the storm and investing more if the price drops significantly.


Exactly what I'm doing, slowly adding as this plays out. I don't think there will be a fast recovery (< 6 months) but of course things can change in a hurry.


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## GoldStone

The last bear market in oil lasted 19 years. And that was before US shale oil revolution...


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## cainvest

jacofan said:


> How will we know when oil has bottomed? Easy, when we look back on a 2 year chart and see the distinct low point. :biggrin:


Of course that's assuming its going up within two years. 



GoldStone said:


> The last bear market in oil lasted 19 years. And that was before US shale oil revolution...


The world is quite a different place now from when most of that chart shows, unlikely we'd have a very long (> 5 years) bear market on oil IMO, but that's just a guess obviously.
Middle east tensions alone could drive the price up significantly (and quickly) but I do think oil is not a good buy for those looking for short term gains.


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## GoldStone

cainvest said:


> The world is quite a different place now from when most of that chart shows


Sure, we can ignore most of the chart. But not the last major bear market. It's not that far off in the past.


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## AltaRed

I'd suggest anything since the first OPEC oil price crisis of 1973 is relevant. Nothing before that is.


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## cainvest

GoldStone said:


> Sure, we can ignore most of the chart. But not the last major bear market. It's not that far off in the past.


I agree with that though I think tensions in that area (from more sources as well) are running higher now than then. I gather that big spike before 1995 was the start of desert storm, hard to tell the exact date from that chart.


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## gibor365

interesting numbers about future oil demand.

Total number of Chinese drivers in Q3 2010 was 200M.
Total number of Chinese drivers surpassed 300M in Q3 2014, up 100M in 4 years.
Expected total number of new car sales in China for 2014 is 23M.
In 2013, the US had about 0.8 cars per capita, China 0.26 and India 0.18.
The birth rate in the US is 13 per 1000 people, in India it is 21.


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## AltaRed

None of that data can be translated literally into oil demand. Smaller vehicles, higher fuel efficiency, hybrids, electrics, etc. all boundary conditioned by national policies limiting oil imports will keep the lid on the pace of oil consumption in the developing countries. SE Asia, e.g. Vietnam and Thailand, are pretty good examples of fuel efficiency in transport.


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## gibor365

AltaRed said:


> None of that data can be translated literally into oil demand.


 Literally, no...but it shows the trend....


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## none

^ that logic isn't really consistent....

IF oil goes to $40 I may take a gamble - beyond that I'm sticking with my potato.

http://www.telegraph.co.uk/finance/...h-oil-price-to-40-says-Gulf-oil-minister.html


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## Pluto

It wouldn't surprise me to see 40 for a while. OPEC isn't going to back off now. they are going to keep going until high cost producers pack it in. 
part of the oil story is OPEC doesn't have the power to control prices any more. Some say OPEC is kaput because they only produce 1/3 of the worlds oil, but previously, they produced 2/3. In the later case, they were in the drivers seat.


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## GoldStone

Very few people saw the crash coming but now suddenly everyone is an oil expert.


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## dogcom

Some OPEC officials have mentioned that even at 40 dollars OPEC will maintain production as Pluto mentioned above. Which means they have a war to win or they wouldn't be throwing around numbers like that.


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## Chris L

OPEC has said that oil will find it's new value, which "could" go as low as $40. Regardless, they won't cut production (no plans), the market will find the price. They also said that they figured the price was being driven lower by speculation or fear and had overshot. This implies that they figure the real value of oil is something higher than it is now. My guess, $75-$85.


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## Toronto.gal

GoldStone said:


> Very few people saw the crash coming but now suddenly everyone is an oil expert.


Who predicted oil at current prices in 2014?

LOTS of people did predict price corrections, but not an epic crash that I can remember.

+1 on the expert part.


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## doctrine

It seems to me like some oil stocks aren't reacting as much as the oil price as they have been over the last few months. Oil fell nearly 4% today, and XEG only fell 0.82%. SU and CNQ were hit but a lot of other names were up. I don't know if thats a sign of the bottom, but I think it's a sign that eventually these oil companies will be cheap enough that the effects of 2+ years of $50-60 oil are being priced into balance sheets etc.


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## lonewolf

Toronto.gal said:


> Who predicted oil at current prices in 2014?
> 
> LOTS of people did predict price corrections, but not an epic crash that I can remember.
> 
> +1 on the expert part.



Sell the world, deflationary crash


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## humble_pie

wolf did i see you mentioning SPX/SPY puts only go out to 2016 ...

i did find an SPY LEAPs listing out to january 2017. The jan/17 200 puts (SPY at 199.51) were 24.00-27.30, for example. These have american style expirations which is a relief, compared to european style cash expirations for the SPXs. The underlying is SPY the ETF, so the deliverable is slightly easier to manage imho. However, the premiums are high enough that i'd also check out XIU, the LEAPs of march 2017.

i am still looking to see if any canadian brokers offer trading in the mother of them all, SPXPM. Reportedly this mother has SuperLeaps that go out 5 years. Cash settlement is $140,000, european style only. She was built for institutions. 

there's a mini, XSP. Is this the one that goes to 2016? it's 1/100th of SPXPM? cash, european?


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## lonewolf

Thanks Humble for info 1 month is not that much longer for the SPY, Never herd of SPXPM will have to check it out. ( It seams like the S&P is the index to short if there is a big market decline other indexes might drop further but I guess few think that 500 large companies will get hit hard so if the S&P gets hit hard I think there is more money to be made there just because option prices are cheaper per a percentage below the underlying most of the time )

Was a little disappointed when I went to CBOE website do not like the changes they made, have not been for awhile. (unless I went to a different site ) The SPY contracts never went far enough out of the money for 2017. I wanted to play a farther out of the money which is more risk of being wrong but if right profits will be a lot bigger. Also commission costs when options are not expensive adds up when doing small contracts.


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## lonewolf

Humble, I wonder if SPXPM is still opening up new option chains, When they came out they were longer term then the SPX leaps but since the chain has been out a while the farthest out I can find is Dec 2016. Maybe SPXPM is a different symbol now or just simply or just stopped going that far out ?

Thanks lonewolf


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## RBull

When its a year later and oil has been steadily rising.


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## gibor365

Toronto.gal said:


> Who predicted oil at current prices in 2014?


It's like to predict Earthquake or tsunami in Japan


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## Toronto.gal

gibor said:


> It's like to predict Earthquake or tsunami in Japan


Exactly, NO ONE predicted it. Not even these experts came close: :biggrin:


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## hboy43

Toronto.gal said:


> Who predicted oil at current prices in 2014?


The only thing I predict in investing is that sooner or later, if I am sufficiently patient, someone will sell me their shares at a price which in hindsight, in the fullness of time, they will wish they had not. Oh, and I will be insufficiently patient and be bested before this point on a regular basis.

What makes it all work is that more shares are to be had at lower prices for the same dollars, so being right only 50 or 60% of the time produces splendid results in the aggregate.

We shall see if COS and BTE shareholders are added to the list at current price levels or am I bested and have to take a haircut and buy more at lower prices to find regretful former shareholders.

hboy43


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## Toronto.gal

hboy43 said:


> What makes it all work is that *more shares are to be had at lower prices for the same dollars, so being right only 50 or 60% of the time produces splendid results in the aggregate.*


Indeed. 

Not long ago, $1K bought 50 COS sh; today same amount would have bought 125 sh at today's low.


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## Nemo2

Will Rogers, November 1929...after the crash:

_“Buy stocks that go up; if they don’t go up, don’t buy them.” _


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## etfstrader

I strongly believe oil is going to rally in short-term from here;

a) Look at how huge the volume is today









b) The main component pulling down the whole market during afternoon is the airline industry. See how heavy big players dumped all those airline stocks which is a good sign for oil.


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## thepitchedlink

etfstrader said:


> I strongly believe oil is going to rally in short-term from here;
> 
> a) Look at how huge the volume is today
> 
> View attachment 2970
> 
> 
> b) The main component pulling down the whole market during afternoon is the airline industry. See how heavy big players dumped all those airline stocks which is a good sign for oil.
> 
> Please explain...you mean that airline stocks where being dumped b/c the "thinking " is that oil will be headed back up? Therefore hurting the airlines again?


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## lonewolf

Huge volume is very often seen @ momentum lows. ETFtrader is right the spike in volume a long with cycles indicate the seasonal rally could start here.

I do think the 100 dollar oil was the abnormal. The abnormal price was seen for so long recently people got used to it & thought the high price was the norm. Oil has a strong seasonality trend which we are getting closer to. 

Perhaps it is because the energy from the sun will be increasing after the winter solstice giving us more energy giving energy to energy stocks & energy commodities LOL


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## lonewolf

Longer term the larger 3 year cycle will pull oil lower after the seasonal rally.


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## Fraser19

Everything seems to be moving up now.
If this is a dead cat bounce it's a big bounce.
Would have been nice to pick up some HSE or CVE yesterday.


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## gibor365

> Would have been nice to pick up some HSE or CVE yesterday.


 not yesterday, but on Monday  I actually planned to add to HSE on Tuesday, but it was already a bit late


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## Fraser19

Yup, I got 5,000.00 in bonds that clear on the 22nd. They where purchases in 99,00,01,02,03. I would have liked to see today's jump happen in January.......
Lots of stocks are up 5-8%, would have probably been the same return in a day as the annualized return of all of those bonds.


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## gladaki

gibor said:


> not yesterday, but on Monday  I actually planned to add to HSE on Tuesday, but it was already a bit late


I am sure its just temporary. There will be downfall soon..you will get plenty of opportunities.


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## blin10

gladaki said:


> I am sure its just temporary. There will be downfall soon..you will get plenty of opportunities.


if you're sure, sell your house and short oil, you'll make a killing... oh wait...


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## gladaki

blin10 said:


> if you're sure, sell your house and short oil, you'll make a killing... oh wait...


No one is sure about anything ..Its just the numbers released by IEA says that there will be 1.5 million barrel extra oil per day in first quater of 2015.
so I can only say based on it..that it should go down.

Also this news may be of ur interest 
http://www.bnn.ca/News/2014/12/17/Brent-crude-holds-below-60-as-OPEC-Russia-keep-pumping.aspx


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## My Own Advisor

I _really hope_ I didn't miss the bottom, no money to invest until early in the New Year.

Damn markets...


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## HaroldCrump

You guys want a Santa Rally...but you also don't want to miss the bottom.
What do you really want?
You guys are confusing the man upstairs...


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## supperfly17

HaroldCrump said:


> You guys want a Santa Rally...but you also don't want to miss the bottom.
> What do you really want?
> You guys are confusing the man upstairs...


Want best of both. Im not sure what to think anymore. All signs point to oil going lower, and oil stocks tumbling even more. Rally is in because people think the bottom has been hit, but who knows...


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## Fraser19

One does not simply understand the market.


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## My Own Advisor

@harold, I personally wanted things to stay "cheap" until Jan. 1...then, they can slowly rise....

Can't have it eh? LOL: "You guys are confusing the man upstairs..."


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## gladaki

The drama surrounding the Russian economy, currency and stock market – along with the dual crash in crude oil – has shaken confidence around the world. Volatility has spread throughout the US stock and bond markets in recent days. History tells us it can get significantly worse really quickly before the storm passes – a la the currency crises of the summer of 1998. At the end of the day, we just don’t know.

Source: Buffett Knows the Difference Between Volatility and Risk. Do You?


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## etfstrader

thepitchedlink said:


> etfstrader said:
> 
> 
> 
> I strongly believe oil is going to rally in short-term from here;
> 
> a) Look at how huge the volume is today
> 
> View attachment 2970
> 
> 
> b) The main component pulling down the whole market during afternoon is the airline industry. See how heavy big players dumped all those airline stocks which is a good sign for oil.
> 
> Please explain...you mean that airline stocks where being dumped b/c the "thinking " is that oil will be headed back up? Therefore hurting the airlines again?
> 
> 
> 
> Have you ever heard of sectors rotation or momentum stocks? That is what some big players do to make big profits if they time it right. In this case, it does not mean airline stocks will go down from here, but these stocks are no longer momentum ones anymore. So, they dumped this industry and move onto the next target, which most of us (as retail investors) do not have a clue.
Click to expand...


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## fatcat

gibor said:


> not yesterday, but on Monday  I actually planned to add to HSE on Tuesday, but it was already a bit late


really ? the bottom is in ? ... i must be way off because, to use a baseball analogy, it feels like we are in the 3rd inning of a 9 inning game

titanic planet wide forces are pushing hard against each other and this little rally calls it ? ... wow ...

Wapiganapo tembo nyasi huumia. (Swahili) 
When elephants fight the grass (reeds) gets hurt. (English)


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## HaroldCrump

Good analogy - the reeds in this case are emerging market economies & currencies.
All E/M currencies getting crushed in last 6 weeks.
This will create massive problems in those countries.


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## Pluto

I think the odds are the bottoming process is not over, and there will be at least one more sell off in oil stocks. don't have any idea if the next bottom will be lower or higher than the last bottom. This big rebound wasn't specific to oil, as just about every thing went up in relief, I guess, over the Fed being "patient". But these big 9-1 up days seem to have more follow through power early in a bull market, and this isn't early in a bull. I guess the thing that could change this perspective on oil stocks is if, out of the blue, some cartel decided to cut production, but that doesn't seem likely. 

No, I don't think anyone has missed a buying opportunity in oil stocks...Just wait for the next sell off. 

(Incidentally, if one did not buy oil stocks 6 or 12 months ago because there didn't seem to be much appreciation potential, and you are buying quality now, and you end up making money over the next few years as the industry recovers your critics might say: you are market timing and you can't do that, every thing is luck, you will probably be sideswiped, etc etc etc. 

And if one buys on days where the prices are going down, one improves their chances of buying at or near a bottom. And if you do happen to buy exactly on a bottom, partly due to your choice of waiting for a crisis, then buying quality on spikes down, the critics will still say you are timing the market, you can't do that, you are just lucky...The critics, of course have to ignore the choices you made to sell and stay away from areas that had little appreciation potential, so you had cash to buy in the crisis when every one else is fearful. It isn't really market timing. Its identifying and taking advantage of opportunities.)


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## doctrine

The bottom is clearly not in. Both WTI and Brent setting a new 5+ year closing low. It might not be obvious, but some oil stocks dropped 8-12% from earlier highs (like CPG), and the energy index itself was down ~3.5% from the high in the morning. This bounce during the week would be a good time to reduce exposure if you're not comfortable with your holdings or take profits if you hit the bottom in the last week.


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## Synergy

doctrine said:


> The bottom is clearly not in. Both WTI and Brent setting a new 5+ year closing low. It might not be obvious, but some oil stocks dropped 8-12% from earlier highs (like CPG), and the energy index itself was down ~3.5% from the high in the morning. This bounce during the week would be a good time to reduce exposure if you're not comfortable with your holdings or take profits if you hit the bottom in the last week.


Good advice. It's just a hunch, but I don't think the selling is over just yet either.


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## MoreMiles

XEG up 15% in 3 days.... Arrgh, only if I could have timed it right.


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## Pluto

MoreMiles said:


> XEG up 15% in 3 days.... Arrgh, only if I could have timed it right.


You don't have to be absolutely perfect. 
Don't buy the rebound, buy during a sell off...Get a chart of xeg with a 50 day ma. Check out the distance below the ma at various points on the chart. Buy when the distance is greatest. Such visual aids help to buy close to a bottom. Buy in stages on the way down. 

Years from now, when the drillers are going full out, and everything is wonderful in the oil patch, and people have been complaining about the high gas prices for some time, consider selling into rallies - the exact opposite of the buying strategy.


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## thepitchedlink

.Get a chart of xeg with a 50 day ma. Check out the distance below the ma at various points on the chart. Buy when the distance is greatest. Such visual aids help to buy close to a bottom. Buy in stages on the way down. 

Hey Pluto, can you elaborate on this a bit more.....I'm looking of a MA chart now on iTrade. Any info like this is most appreciated by the newbies in the group:biggrin:


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## Siciliano698

For crude oil I've looked @ the etf uco (ProShares Ultra DJ-UBS Crude Oil) I've looked @ the long term charts for the last 3 bear markets, it seems we end a bear cycle December 19,20,21.... 

For now I think we had a short-term bottom @ 55 possibly a rise to near $70 but after Feburary watch out......


the long term paints a different picture..............


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## HaroldCrump

If you guys wanna play the other side of the oil crash, you could buy puts against one of the US junk bonds ETFs.
I believe a significant portion of the junk bonds are high yield shale oil & exploration company bonds.

I am sure hedge funds etc. are already on top of this trade.
However, bankruptcies and blow ups in this sector have not started yet.
If oil does not recover within the next 3 months, something's gotta give.

So there might be still some juice left in placing such a trade.


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## RBull

^According to an RBC dominion report I read today 16% of HY bonds in the US is oil debt. In 2004 this was 4%.


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## Pluto

thepitchedlink said:


> .Get a chart of xeg with a 50 day ma. Check out the distance below the ma at various points on the chart. Buy when the distance is greatest. Such visual aids help to buy close to a bottom. Buy in stages on the way down.
> 
> Hey Pluto, can you elaborate on this a bit more.....I'm looking of a MA chart now on iTrade. Any info like this is most appreciated by the newbies in the group:biggrin:


It's good if you have a chart that goes back 10 years or so so you can study the last crash in xeg. It is also not bad to have a 50 day ma nad a 200 day ma. in the 2008-9 crash, you can see that the best times to buy were when the price was well below those moving averages. 

When you are in bottom fishing mode, it is best not to get too eager too early. In this example, when xeg dropped to the level around OCT 20, 2014 and talking heads say don't catch a falling knife - its usually really true. do not buy. For instance look back at 2008 - the first leg down ending about aug 11 2008 - do not buy. then the rebound comes up to Aug 25 2008. do not buy. this is sometimes called the suckers rally. then you get that massive almost straight down crash to OCT 6 2008. considering the % decline, aggressive folks can start buying here but after such a fast crash there is no rush and one should assume there will be more downside. then the rebound to Oct 27 - do not buy - a suckers rally. This is where I get really interested to start buying on the next spike down. You will hear "don't catch a falling knife" from various sources but it becomes a ineffective rule at this point. I try to buy as close to the tip/point of the spike down. the price chart with moving averages helps to gauge where the tip might be by looking at the distance the price is below the ma. Use history as a guide. You can't be a perfectionist - if you don't get the exact bottom just tell yourself at least you didn't buy on the rebound high point. Often, right near the bottom of a spike down there will be very bearish headline news - pay no attention. such articles always appear during times when bottom fishing is its most productive. Such headline articles signify fear, which is a buy signal. 



Comparing 2008 to the present - this one so far is not as dramatic probably because we are starting from a lower high oil price it 140 in 2008 and around 100 in 2014. In 2009 it took about 8 months peak to bottom - plenty of time to buy. My thesis is this one isn't over, and there will be at least one more big sell off. 
By the time the 50 d ma crosses above the 200 day ma, I'm not interested in buying anymore, and the top time to buy is when the price is below the 50 day.


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## thepitchedlink

Great info Pluto, thanks very much for sharing


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## lightcycle

The problem with running any sort of TA on the price of oil is that this is an artificial situation created by Saudi Arabia and can essentially be reversed overnight depending on who loses the game of chicken being played between SA and non-OPEC producers.

SA have already said they will keep oversupplying and see the price to $40 if need be, so if I was a shaler or a non-OPEC member, I would be designing scenarios on how to survive such an event.

- We are already seeing consolidation in the industry that will create larger, potentially more cost-effective competition. Did the Saudis foresee this? Is this what they want? Will SA blink first and lower production?

- Will non-OPEC producers fall in line and come to the table with voluntary caps?

- Price of oil is causing massive political destabilization in the Middle East and Russia. The FBI has declared the Sony hack as an act of war against the US from North Korea. If conflict breaks out, what will happen to the price of oil then?

There are so many issues that can turn the ship around in a heartbeat. I don't believe drawing lines on charts will be very effective in the current environment.


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## fatcat

lightcycle said:


> The problem with running any sort of TA on the price of oil is that this is an artificial situation created by Saudi Arabia and can essentially be reversed overnight depending on who loses the game of chicken being played between SA and non-OPEC producers.
> 
> SA have already said they will keep oversupplying and see the price to $40 if need be, so if I was a shaler or a non-OPEC member, I would be designing scenarios on how to survive such an event.
> 
> - We are already seeing consolidation in the industry that will create larger, potentially more cost-effective competition. Did the Saudis foresee this? Is this what they want? Will SA blink first and lower production?
> 
> - Will non-OPEC producers fall in line and come to the table with voluntary caps?
> 
> - Price of oil is causing massive political destabilization in the Middle East and Russia. The FBI has declared the Sony hack as an act of war against the US from North Korea. If conflict breaks out, what will happen to the price of oil then?
> 
> There are so many issues that can turn the ship around in a heartbeat. I don't believe drawing lines on charts will be very effective in the current environment.


+1 ... predicting the price of oil in the current conditions strikes me as a pure gamble wrapped in historical data

if we are all so good at predicting the bottom and subsequent rise, how come we all missed the vertiginous plunge ?

this guys thinks that $60 oil is the new $75 oil: http://qz.com/314916/why-60-a-barrel-oil-is-the-new-75/ based on efficiencies

maybe the saudis are just shaking the ants off the picnic blanket and it'll go to 100 next month ? ... or 40 ?


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## Pluto

Lightcycle: all you are doing is pointing out unknowns that contribute to fear of action. Its clear that you require more information and certainty than will ever be available for you to act in a way that will make you an effective investor. I don't have an answer to your problems. Do you have anything proactive to offer? You are more than welcome to offer answers, methods, strategies to deal with such circumstances. You talk as if you know what you are talking about, but you never offer your strategies. You talk about what you believe doesn't work, but you never offer you view of what will work. 

Fatcat: I wasn't predicting. And I did miss the plunge in the sense that I didn't own any oil companies. It was obvious to me they weren't worth owning. Back in 2007, I didn't own any oil companies because they weren't worth owning. during the 2008-9 plunge I bought xeg, and later sold it for a profit and so I wouldn't be vulnerable to the next plunge in the oil industry. I bet you two both owned oil before the plunge when it was a gamble and got creamed. Now that it isn't the gamble it was 6 months ago, you see it as a gamble. I bet you two are always out of sync with the market.

so are you guys going to give us your proven strategies, or are you just going to continue to be purely negative?


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## Chris L

I think Lightcycle is right. The price of oil is tied to the actions of OPEC. When supply diminishes then oil will prices will rise. I think they may already be rising as I think they have already overshot the fair market value. Look at the data directly to see what is going to happen. OPEC says the market with find the price. That's true. In past, oil would have found OPEC's value - whatever they were willing to cut to generate the desired price. Well now, they are throwing their hands up since there are 60% of oil coming up from elsewhere. Therefore, this is not their problem...they will let the market sort itself out. Projects being cancelled next year practically guarantees higher oil prices next year. Many companies are turning that off right now. So you think OPEC is going to boost production to KEEP it down next year. That's foolish. OPEC is just taking some air out of the market, but it's feeling to burn too. So naturally, that burn is going to result in high oil prices. Again, no one is happy with $50 oil, not even SA. Throw your charts out. When production drops, oil prices will rise and prices will rise when production gets cut. Could be a death by a thousand small slashes to those who need $100 oil, or a cut from OPEC. That will decide when oil prices will rise. Now or in next year. This is a man-man production where a voice or many voices will decide. Regardless, now or later, prices go up.


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## fatcat

Pluto said:


> Lightcycle: all you are doing is pointing out unknowns that contribute to fear of action. Its clear that you require more information and certainty than will ever be available for you to act in a way that will make you an effective investor. I don't have an answer to your problems. Do you have anything proactive to offer? You are more than welcome to offer answers, methods, strategies to deal with such circumstances. You talk as if you know what you are talking about, but you never offer your strategies. You talk about what you believe doesn't work, but you never offer you view of what will work.
> 
> Fatcat: I wasn't predicting. And I did miss the plunge in the sense that I didn't own any oil companies. It was obvious to me they weren't worth owning. Back in 2007, I didn't own any oil companies because they weren't worth owning. during the 2008-9 plunge I bought xeg, and later sold it for a profit and so I wouldn't be vulnerable to the next plunge in the oil industry. I bet you two both owned oil before the plunge when it was a gamble and got creamed. Now that it isn't the gamble it was 6 months ago, you see it as a gamble. I bet you two are always out of sync with the market.
> 
> so are you guys going to give us your proven strategies, or are you just going to continue to be purely negative?


i did own oil, sold some for a tax loss and still hold some su which i will sell hopefully when it makes a move up (or decide what i want to do if drops like a rock) 

at my age, protecting capital is the prime directive and i would rather forfeit some gains and even take a loss if i see a reasonable chance of a precipitous loss ... 

what i have learned from this is that if i style myself a "mostly dividend growth investor" (i also have pure growth stocks) i should probably avoid energy in the future since it just too volatile and there are plenty (far too many to choose from) of other good dividend stocks to own in the other 9 sectors

i am mostly quite positive on these other sectors even if i appear negative on oil

oil, is perfectly fine to own as long as you call it what it is: speculation and in the present time it more resembles gambling ... nothing wrong with either pursuits

ps. you don't have to own oil and you don't have to figure it out ... why do you feel you need to take any action at all ? why not just sit out what is, at the moment, a completely opaque and chaotic commodity ?


----------



## supperfly17

Maybe off topic, but I had this discussion with a friend of mine. Hypothetically speaking, would the Russians have the ability to ask countries they export oil to, to get paid in Euros for the oil, and therefore weakening the US economy that way. Is that even possible?


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## dogcom

Russia could ask for payment in dollars and then right away convert to gold or ask for payment in gold outright. This would reopen the gold window closed by Nixon and would be a big problem for the US when it runs out of gold collapsing the COMEX and the entire paper scheme to suppress gold and keeping a strong dollar in the face of extreme debt. I heard they may be possibly this now which may be why oil has fallen so far and the US sudden hate for Russia.


----------



## Siciliano698

The Comex put a buzzer/collar starting on Monday...


"gold trading will now halt for five minutes after an intraday move of $100 from the previous close. The same for silver after a move of $3."

Could get interesting....


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## Pluto

Chris L said:


> When supply diminishes then oil will prices will rise.


I agree with that. As to the other stuff, I'm not sure what you are talking about.


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## Pluto

fatcat said:


> i did own oil, sold some for a tax loss and still hold some su which i will sell hopefully when it makes a move up (or decide what i want to do if drops like a rock)
> i am mostly quite positive on these other sectors even if i appear negative on oil
> 
> oil, is perfectly fine to own as long as you call it what it is: speculation and in the present time it more resembles gambling ... nothing wrong with either pursuits
> 
> ps. you don't have to own oil and you don't have to figure it out ... why do you feel you need to take any action at all ? why not just sit out what is, at the moment, a completely opaque and chaotic commodity ?


1. I don't feel I have to take action. Some guy asked me a question. I answered. that's all. 
2. why did you sell oil stuff for a tax loss? Why didn't you sell it earlier for a profit? then you might have buying power to buy oil stocks at lower prices. 

The thing that puzzles me is that my critics seem to be oblivious of cycles. These cycles have low pessimistic fearful points: Buy. Then they have higher cycles: sell. It isn't difficult. I take the pessimism from you, lightcycle, and Chris L as a general buy signal for oil stocks. 

3. So you are a dividend investor. Look at HSE, a fine company with a fine dividend. In the next sell off in oil stocks which may not be too far off, think about buying some HSE. Then hang on for a some years - at least until the oil industry is really cooking. by that time you should be sitting with a decent profit, not to mention all the dividends you received in the meantime. Then sell before the industry tanks again. 

4. So what industries are you positive in? Are you sure they are not due for a fall?


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## lightcycle

wow. defensive much?


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## dogcom

Pluto, sicillano698 is right about a COMEX collar for gold and silver coming Monday so this is fact not speculation. You have to wonder why now when gold and silver have limited downside left unless they are afraid of the upside.


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## Chris L

I'm not pessimistic about oil Pluto, at all. I bought a pile and will buy more. Understanding why oil is low is why I've bought it.


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## Chris L

Go do some digging and tell me the % of companies that can afford to be pushing out oil at sub $100.

You'll see that in 6 mos time, ~80% of the world oil supply will be offline (to some extent). Oil prices are very likely to spike in a very large way come spring.

http://business.financialpost.com/2...ollapse-after-price-nosedive/?__lsa=d49c-11c3

However, Saudi Arabia’s powerful oil minister Ali Naimi said that the current downturn in prices was only temporary. “I am optimistic about the future,” he told the official Saudi Press Agency Wednesday. “What we are facing now and what the world is facing is a temporary situation and will pass.”

Chart of costs: http://www.dailyoilbulletin.com/media/img/Large_-_oilsandssupply---Nov.-27.jpg


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## PuckiTwo

Siciliano698 said:


> The Comex put a buzzer/collar starting on Monday..."gold trading will now halt for five minutes after an *intraday move of $100* from the previous close. The same for silver after a move of $3."Could get interesting....


Probably a stupid question but isn't a move of $100 in gold a huge move? I would like to understand more about that what kind of an impact this decision has. Does it influence currency, stocks, general economy? Could you explain somewhat more or point me into a direction where I can read more about it. Thk you.


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## Chris L

An article that can explain better than I can. Obviously there is no prediction, but it does outline all the factors you need to consider.

http://fivethirtyeight.com/features/the-conventional-wisdom-on-oil-is-always-wrong/


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## Pluto

lightcycle said:


> wow. defensive much?


Still not offering your strategy? Nothing proactive to say? I know what you you are against, but I don't know what you are for.


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## Pluto

Chris L said:


> I'm not pessimistic about oil Pluto, at all. I bought a pile and will buy more. Understanding why oil is low is why I've bought it.


A guy asked me a question. I answered. He didn't ask about understanding why oil was low or dropped. Since he didn't ask that, why is it relevant?


----------



## fatcat

Pluto said:


> 1. I don't feel I have to take action. Some guy asked me a question. I answered. that's all.
> 2. why did you sell oil stuff for a tax loss? Why didn't you sell it earlier for a profit? then you might have buying power to buy oil stocks at lower prices.
> 
> The thing that puzzles me is that my critics seem to be oblivious of cycles. These cycles have low pessimistic fearful points: Buy. Then they have higher cycles: sell. It isn't difficult. I take the pessimism from you, lightcycle, and Chris L as a general buy signal for oil stocks.
> 
> 3. So you are a dividend investor. Look at HSE, a fine company with a fine dividend. In the next sell off in oil stocks which may not be too far off, think about buying some HSE. Then hang on for a some years - at least until the oil industry is really cooking. by that time you should be sitting with a decent profit, not to mention all the dividends you received in the meantime. Then sell before the industry tanks again.
> 
> 4. So what industries are you positive in? Are you sure they are not due for a fall?


you do seem a little worked up pluto ... i am not necessarily pessimistic about oil, i am merely saying that i am going to move my money elsewhere ... anything that can be moved this far and fast downward is not a good fit for me as a mostly defensive investor highly sensitive to the downside

second, i am saying that at the moment it is very hard to value any oil company since their share prices respond closely to the price of oil and the price is being set by forces that are both way above our heads and also very hard to understand, thats all

oil shares are perfectly fine to own as a purely speculative gamble at present ... you are effectively going to the dog track and this appeals to a lot of us including me

nobody has to own oil, there are way more great companies out there than i can afford

ps. if i change my mind (as i often do since i _am_ always out of sync with the market) i have been thinking that perhaps cpg or bte or cos or other high yielders are a better way to be compensated for the risk of owning oil ... cnq and su have more friction during price plunges but pay so much less in dividends that over time the payoff with the high-yield oils offsets the lack of friction during plunges

i'm sure someone smarter than me has run the numbers on this


----------



## Chris L

Pluto said:


> A guy asked me a question. I answered. He didn't ask about understanding why oil was low or dropped. Since he didn't ask that, why is it relevant?


Because you said this "I take the pessimism from you, lightcycle, and Chris L as a general buy signal for oil stocks."

I'm not pessimistic about oil. You lumped me in there without any reason for doing so.


----------



## Synergy

CBC radio one had a feature on oil this morning (around 6am eastern standard time). I only caught a few minutes of it but it sounded quite interesting. They talked about the future of oil, how high oil prices stimulate alternative energy markets, etc. I'm trying to find a recorded version online but Iv'e had no luck so far. Anyone else catch this feature?


----------



## Pluto

Chris L said:


> An article that can explain better than I can. Obviously there is no prediction, but it does outline all the factors you need to consider.
> 
> http://fivethirtyeight.com/features/the-conventional-wisdom-on-oil-is-always-wrong/


I think some people are considering the factors in the article. Also your article has charts. I thought you didn't like charts. 
If you are relying on OPEC, good luck. I'm operating on the assumption that OPEC is kaput. My Saudi oil contact says from their perspective the problem is shale oil production in the US and Canadian oil sands combining to cause an oil oversupply that they can't counter with production cuts. Your article failed to mention that opec no longer produces a large enough % of total world production to control prices. 

But none of this is relevant to what the guy asked me. He didn't ask for any explanation about why prices had dropped.


----------



## Pluto

Chris L said:


> Because you said this "I take the pessimism from you, lightcycle, and Chris L as a general buy signal for oil stocks."
> 
> I'm not pessimistic about oil. You lumped me in there without any reason for doing so.


OK, so you are not pessimistic. I still do not get the point of your post vis a vis the question the guy asked me.


----------



## Pluto

fatcat said:


> the price of oil and the price is being set by forces that are both way above our heads and also very hard to understand, thats all
> 
> oil shares are perfectly fine to own as a purely speculative gamble at present
> 
> nobody has to own oil, there are way more great companies out there than i can afford


1. The law of supply and demand isn't that difficult. 
2. Why is it a gamble now, and wasn't a gamble 6 - 12 months ago? All I'm saying is its a gamble when the cycle is topping out and optimism abounds, and not a gamble when it is in disarray and fear abounds. BTE and COS don't suit you age and goals. The are not total gambles, but close to it. HSE has your dividend and survivability characteristics. CPG is riskier than HSE, but not, in my view as risky as BTE and COS. Based on your goals, I'd focus on HSE, and maybe some in CPG. Forget the rest. buying BTE and COS is relying on a fairly quick recovery, which might not be forthcoming. 
2. What are these other great companies in other industries? Are you sure they are not setting up for a fall?


----------



## Chris L

Pluto said:


> OK, so you are not pessimistic. I still do not get the point of your post vis a vis the question the guy asked me.


I was only addressing the topic at hand, not you specifically. I think we agree on more that you might think.

What's your buying strategy. What's your take on BTE and COS?


----------



## fatcat

Pluto said:


> 1. The law of supply and demand isn't that difficult.
> 2. Why is it a gamble now, and wasn't a gamble 6 - 12 months ago? All I'm saying is its a gamble when the cycle is topping out and optimism abounds, and not a gamble when it is in disarray and fear abounds. BTE and COS don't suit you age and goals. The are not total gambles, but close to it. HSE has your dividend and survivability characteristics. CPG is riskier than HSE, but not, in my view as risky as BTE and COS. Based on your goals, I'd focus on HSE, and maybe some in CPG. Forget the rest. buying BTE and COS is relying on a fairly quick recovery, which might not be forthcoming.
> 2. What are these other great companies in other industries? Are you sure they are not setting up for a fall?


i still own half of my SU which is probably as good a hold as HSE, though both are solid companies

but i could just as well sell the SU and put the money into DIS or CNR or DOL or SBUX or ???? all of which i own ... and all of which can drop at a moments notice but i at least feel i have some understanding of the business and pricing model whereas with oil i really have no idea

this is from the article that chris referenced:



> *No one has any idea what oil prices will do:* In July 2008, my Journal colleague Neil King asked a wide range of energy journalists, economists and other experts to anonymously predict what the price of oil would be at the end of the year. The nearly two dozen responses ranged from $70 a barrel at the low end to $167.50 at the high end.3 The actual answer: $44.60.4
> 
> *It isn’t surprising that experts aren’t good at predicting prices.* Global oil markets are a function of countless variables — geopolitics, economics, technology, geology — each with its own inherent uncertainty. And even if you get those estimates right, you never know when a war in the Middle East or an oil boom in North Dakota will suddenly turn the whole formula on its head.


my point is that if experts, those that study oil 50 hours a week for a living, if they can't predict where oil will go, how can the small investor really be confident that they know the direction or stable price ?

this makes oil a speculative investment ... which is prefectly fine and appropriate for many investors that like to trade and are willing to ride out long, even very long downswings in share prices

and the point is: why hold on to a losing asset for a long period if the cash can be profitably deployed elsewhere

most of us who talk loudly about "buying and holding for the long term" even if an asset tanks are blowing it out our bum and will eventually throw in the towel and move on ... it takes some steel to ride out many dollars in the red for long periods ... and it may just be stupid because by definition you are passing up opportunities elsewhere


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## cainvest

fatcat said:


> and the point is: why hold on to a losing asset for a long period if the cash can be profitably deployed elsewhere


Simple answer ... one believes the future return of the currently losing asset(s) will be greater than the return of investments in other areas.


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## Pluto

Chris L said:


> I was only addressing the topic at hand, not you specifically. I think we agree on more that you might think.
> 
> What's your buying strategy. What's your take on BTE and COS?


My understanding is those two have considerable debt so buying them would be based on the assumption the price of oil would recover sooner rather than later. They are too risky for me especially this early in the oil price decline. I'm more conservative and looking for dividends, so I nibbled on some HSE around 22.5. Going to wait for the next sell off and see how it goes may buy some more then. For a riskier one, that doesn't have as much risk in my opinion as bte and cos, its cpg. CPG is riskier than HSE, so I'm just going to wait and watch that one for now. My strategy is buy survivors on plunges, (not rebounds). For that I use a chart. I want to see where we've been when I buy. I want to make sure I am buying during a plunge and get as close to the bottom tip of the plunge as possible. I don't get the fundamental analysis vs charts debate. they are both valuable. Charts are valuable partly because prices precede fundamentals. If one waits until the fundamentals are announced - ie we look back in hindsight and see the bottom for sure - its too late to get the lowest prices. That's what crowd followers do: they wait until in their mind its a sure thing, but by that time the lowest prices are history, and all the easy money has been made. I decline to be a crowd follower and I realize fundamentals are always behind prices, so I use charts to help me buy survivors at the lowest possible prices. 

Also, when I look at a chart of historical oil prices I ask how much time did oil spend near its highs? For instance how long was oil with in $10 of 140? not long. And when it plunged it went < $40. How much time was it <40. not long. so I assume that it doesn't really matter where the exact bottom will be, because the price of oil spends most of its time somewhere in the middle. 

In sum my strategy is buy conservative survivors during fearful sell offs. Buy low. Then years later, during times of optimism - in this case when the price of oil is high and the industry is really cooking, sell into rallies. That way I am striving to buy the lowest possible price, and sell the highest possible price. In the meantime I get paid a dividend. My interest in fundamentals right now is only to identify conservative companies that will not be plagued by a lot of debt. Then, it is purely timing the purchases, and price and volume charts are useful to me in determining extreme reactions to the downside which are buy points. The 50 day ma has to be substantially below the 200 day or is is too early. Also the price (of my target stock) has to be substantially below the 50 day. To me those are good buy points. By the time the 50 day ma moves above the 200 day ma, its too late to make the easy money. So I catch the falling knife, but not the early ones.


----------



## Pluto

fatcat said:


> i still own half of my SU which is probably as good a hold as HSE, though both are solid companies
> 
> but i could just as well sell the SU and put the money into DIS or CNR or DOL or SBUX or ???? all of which i own ... and all of which can drop at a moments notice but i at least feel i have some understanding of the business and pricing model whereas with oil i really have no idea
> 
> this is from the article that chris referenced:
> 
> 
> 
> my point is that if experts, those that study oil 50 hours a week for a living, if they can't predict where oil will go, how can the small investor really be confident that they know the direction or stable price ?
> 
> this makes oil a speculative investment ... which is prefectly fine and appropriate for many investors that like to trade and are willing to ride out long, even very long downswings in share prices
> 
> and the point is: why hold on to a losing asset for a long period if the cash can be profitably deployed elsewhere
> 
> most of us who talk loudly about "buying and holding for the long term" even if an asset tanks are blowing it out our bum and will eventually throw in the towel and move on ... it takes some steel to ride out many dollars in the red for long periods ... and it may just be stupid because by definition you are passing up opportunities elsewhere


The article chris cited is a general buy signal. Such articles do not appear when it is a good time to sell. A better time to sell is when the good news articles appeared around the time oil was > 90 and the experts hypothesized higher and higher prices. Since it is known that the experts are wrong, and crowds follow them, go opposite to them. 
Your present thinking is going with the experts and crowd. 
I don't see CNR, DIS, DOL, and SBUX as non speculative alternatives. To me they are good companies riding high on a maturing bull market - the experts and crowd love them. Buying and holding them now is highly speculative. If you don't lighten up on them while they are darlings, or set some stop losses, you will end up in a similar situation as you are with SU. 

I don't talk loudly about buying and holding for the long term even if an asset tanks. I talk about buying quality during times of distress, and selling or at least lightening up years later when the good times are rolling, p/e have expanded, and the conventional wisdom is lacking in skepticism, and says "don't sell now because you'll miss the next 20% upside", and stocks are the only game in town, and so on with more and more positive claims about the future. Don't you see that? If the experts are wrong on oil, what makes you so sure they are right about CNR, DIS, Dol, SBUX? The crowd is greedy for those stocks now, just like they were for some oil stocks back when oil was > 90. Why go with the crowd?


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## cainvest

It's starting to look like we'll see WTI hit the $40 range in early 2015 ...


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## Pluto

Yep. 
Part of my perspective is, however low it goes, it will spend less time near the lows than it spends in the middle of the extremes. So the window of opportunity to buy during fearful pessimistic times will be comparatively short. The lower it goes, the more pressure on the marginal producers to pack it in.
Looks like xeg is done with its rebound, and is pulling back from its rebound high....But the volume is really low on the pullback indicating its just a dip and will resume higher. If that's true, maybe we saw the low in xeg around dec 15. Hmmmm. Anyway, I'm up 20% on hse, and so far quite happy I caught a falling knife and that I used a chart to assist with my timing. If it goes back near its dec 15 lows, I'll be tempted to add some more stock.


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## supperfly17

Pluto said:


> Yep.
> Part of my perspective is, however low it goes, it will spend less time near the lows than it spends in the middle of the extremes. So the window of opportunity to buy during fearful pessimistic times will be comparatively short. The lower it goes, the more pressure on the marginal producers to pack it in.
> Looks like xeg is done with its rebound, and is pulling back from its rebound high....But the volume is really low on the pullback indicating its just a dip and will resume higher. If that's true, maybe we saw the low in xeg around dec 15. Hmmmm. Anyway, I'm up 20% on hse, and so far quite happy I caught a falling knife and that I used a chart to assist with my timing. If it goes back near its dec 15 lows, I'll be tempted to add some more stock.


You really think it was the chart that helped with your timing, or was it coincidental? Seems like the sell-off was based on emotion, and fear, and not on probability/statistics.


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## Pluto

I'm quite sure it wasn't just coincidence. A chart showing where the price and volume was and is, is very helpful to me in picking a buy point. 

Of course there was and is emotion in the sell off, but emotion does not displace probabilities. I don't know where statistics fits in here. But anyway, emotion does not exclude probabilities or statistics. They are all part of the same ball ow wax. 


Besides, the charts can help identify when emotions are most intense. For example, higher than average volume signifies more intense emotion - fear if the price is going down and optimism if the price is going up. Similarity with the rate of price change. So if there is a larger than average volume, and larger than average price change, that indicates the appropriate emotion -


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## OurBigFatWallet

Interesting piece here on the recent drop in oil prices. I think the article is basically saying how/when it goes back up is based on how it dropped (a quick drop means a quick recovery)

http://calgaryherald.com/business/energy/outlook-2015-q-and-a-with-oilpatch-veteran-jim-gray


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## sags

Civeo, a US based company that supplies work camp lodging in the oil sands, announced 1,000 layoffs and the closure of some lodges..........with more layoffs and closures planned.

http://business.financialpost.com/2...gnalling-slowdown-in-alberta/?__lsa=fb78-7f39


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## Pluto

Here is another article that has a chart of break even prices for various regions. 
http://www.vox.com/2014/12/16/7401705/oil-prices-falling

In the meantime, the falling knife I caught, hse, continues to go up. However, it wouldn't surprise me to see another sell off in the oil stocks sometime before spring so I guess I shouldn't be counting my chickens yet.


----------



## dogcom

Here is an article linking oil prices to a collapse in Canadian real estate.

http://www.zerohedge.com/news/2015-01-02/guest-post-oil-looming-canadian-housing-bubble-crash

While I am sure Alberta and a few other provinces will feel this very much if price stays down longer but I am not so sure about the rest of Canada. I think the real pain will come from slowing economies, bad debts as a result of failing oil companies and then hurting the banks.


----------



## humble_pie

i glimpsed a note from morgan stanley pointing out that big oil producers are required by their banks to substantially hedge production forward over a few years.

on the other hand, oil service industries aren't required by their banks to hedge anything. Like, a driller can choose to hedge anticipated lost revenue with a choice of derivative products acting as a kind of insurance, but there's no direct correlation & no bank requirement.

perhaps this is why drillers, rig operators & well service companies fell harder & farther than did big oil. Would this mean that the first signs of recovery will come when precision drilling, trican, calfrac & their kinships appear to be troughing, though.


----------



## lonewolf

dogcom said:


> Here is an article linking oil prices to a collapse in Canadian real estate.
> 
> http://www.zerohedge.com/news/2015-01-02/guest-post-oil-looming-canadian-housing-bubble-crash
> 
> While I am sure Alberta and a few other provinces will feel this very much if price stays down longer but I am not so sure about the rest of Canada. I think the real pain will come from slowing economies, bad debts as a result of failing oil companies and then hurting the banks.


 In 08 the Canadian banks needed bailing (some say they didn't needed others say they did) If they did need bailing what is going to happen to the banks when stocks & real estate both get hit ? When I have some of bigger GICs come due from credit unions I buying a plane ticket to Switzerland to open up an account keep my money safe. Hope it wont be to late.


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## Rusty O'Toole

Zero Hedge has predicted every real estate crash that has occurred in Canada for the last 5 years plus 300 more that never happened.

When the US real estate market crashed in 2008 I feared the same thing would happen in Canada but it never did. Prices dipped about 10% but recovered within 3 or 4 months. Ever since then, pundits have been predicting a real estate crash in Canada based on things like the US market and the price of oil that have little or nothing to do with it.


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## My Own Advisor

Predictions are just that. I consider predictions entertainment. 

That said, I wonder if oil has already bottomed or at least near it. I don't see it going much lower but then again, I have no idea!


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## daddybigbucks

Canada's rig count is down 30%. The states rig count is down 3%. International rig count is up.
Canada won't make much of a difference. 
I'm not even looking to oil companies at this point.


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## gladaki

I think it can go more low...towards high 40ish..but again who knows..
But, I really don't see suncor,CNRL, husky going down soon..was looking at CPG yesterday. Don't really understand that company. Shares outstanding has increased a lot. Current 443 millions mainly because of their drip scheme. Other than that all other companies looks like big risk under high debt..especially meg which I think is has debt of 22 times cash flow.


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## My Own Advisor

If I buy O&G stocks this winter, which I will, I will be sticking to CNQ and SU. 

I have HSE DRIPping comfortably already, don't need to buy more.


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## gladaki

My Own Advisor said:


> If I buy O&G stocks this winter, which I will, I will be sticking to CNQ and SU.
> 
> I have HSE DRIPping comfortably already, don't need to buy more.


At what price you dipped ur toes in husky ??


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## My Own Advisor

Owned it for a few years now, I recall in around $22-$23.


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## Chris L

As we approach $40 oil maximum pessimism is nearing. What are you watching/waiting for? What companies looks good?

The big ones haven't budged as much HSE, SU, but the little guys are almost half off. Which companies have the ability to weather the storm and come out doubling in a couple years?

What are the chances of oil overshooting the $100 mark downstream due to drastic current cuts?

Is anyone making a big bet by stuffing $5,500 worth of a company into their TFSA?


----------



## gladaki

Chris L said:


> As we approach $40 oil maximum pessimism is nearing. What are you watching/waiting for? What companies looks good?
> 
> The big ones haven't budged as much HSE, SU, but the little guys are almost half off. Which companies have the ability to weather the storm and come out doubling in a couple years?
> 
> What are the chances of oil overshooting the $100 mark downstream due to drastic current cuts?
> 
> Is anyone making a big bet by stuffing $5,500 worth of a company into their TFSA?


WCP can be good candidate for your analysis.
BTE has been down considerably. I think ARC resources is also some one with good assets ...
Any comment guys


----------



## Pluto

check out this article: some traders betting on $20 oil. $20 seems like a very pessimistic over reaction to me. 

http://www.marketwatch.com/story/some-traders-are-betting-on-20-oil-2015-01-05?dist=afterbell

The "bear" word is appearing more in the media, indicating to me, a contrarian, we are approximately in buy territory on quality oil stocks (not too much debt.) In my experience by the time the bear word appears, huge chunks of damage have already happened, and stocks start to anticipate happier days. For example, HSE got hammered today along with other stocks, but it has hung in at around 26+ well above its low of 21 and change even though oil hit a new low today. 

Anyway, when I see super bearish articles - $20 oil? - yet the stocks I watch do not go to new lows, it seems to be a positive sign that the low in the stock prices maybe right about here - (but I'm not talking about stocks with too much debt).


----------



## AltaRed

How each company is affected will depend on how much NG it has and also its balance sheet. That said, I don't think many folk appreciate how ugly 4Q results might be, or perhaps even more so 1Q15 results if oil doesn't recover by then. HSE (and similar with downstreams) will always be hurt less than pure E&P companies. Unless oil bottoms by the end of this month, I still think we are going to see new lows in many of these stocks, including infrastructure plays.


----------



## leeder

At this point, there's no indication of any positive catalyst for oil. Probably the only ways to stimulate oil prices are if OPEC cutting production guidance or some sort of war may stimulate the oil prices upward. In terms of the companies, we may have seen maximum pessimism about mid-December. I think stocks have priced in the fact that oil prices are abnormally low and that oil will eventually rebound back to norms. Q4 results will be bad, but I think there's already a fair amount of warning in the markets that this will be the case. In any case, I am glad I sold out on my only E&P holding in Crescent Point at the end of November. In the mean time, I think I will let this bloodbath play out until I see some positive catalyst.


----------



## Chris L

That's the thing, there isn't one bit of news that indicates positive results for oil prices recovering. It's still all bad.


----------



## Mike59

Perhaps we'll know oil has bottomed when nobody is talking about it, it's not in the news, threads like this have to be searched for etc. The junior explorers in gold and the tsx venture index may be getting to that point,but we may be quite a way to go for oil and the larger oil stocks? :cower:


----------



## My Own Advisor

I personally can't see oil going below $50.

I guess it's there now. So, I'm saying, give or take, $49 or $50, we are there. Just my guess of course.

Now, the small stocks are down 50% The studs, CNQ, SU, HSE are walking but albeit wounded. 

"Is anyone making a big bet by stuffing $5,500 worth of a company into their TFSA?"

Not me. If I make a oil bet, it will be in a non-registered account. I just don't have a few $k non-registered right now.


----------



## supperfly17

This morning was the first time in a while that my local pop/rock (no news) radio station started to mention the price of WTI, and how many points the TSX dropped yesterday.


----------



## kcowan

Aren't we talking about the law of supply and demand. US consumers are back to buying SUVs and travelling by car. Same as every other time oil has crashed. Unless one of the big suppliers restrains supply, we will await the revised demand statement.


----------



## Chris L

I think the right way to start rationalizing this is as follows: If oil does not stabilize or approach $80 within 6-8 mos then SA will cut production to restore value. If it does not, then their experiment has failed miserably as they will have both retained their market share (as intended), but sacrificed their overall return by devaluing their product. This is the stop-valve with guarantees higher oil in the future, because this is a question of human logic and capitalism. Naturally, by extension, if oil does not overshoot $100 for a period of time, then again, the experiment by SA has failed as they again, have lost out of the potential gains from having said oil at a consistent $100. 

SA has wagered that a short term glut will lead to a long term undersupply. If they are doing their math correctly, plenty of higher cost oil, with new and risky ventures that are undercapitalized will come off the market leading to a better outcome for themselves in the long run.

Meanwhile, they are likely buying up oil stock and will make a killing when they shot off the taps.

What most people fail to realize is that SA holds all the cards and they don't like losing. To devalue your product must have a corresponding upside.

Lastly, investors much understand that SA is currently suffering. How long are they willing to do so? The answer has already been stipulated - 6 mos. which is when they plan to reconvene and make a decision given the results of the shake-out (which is currently being determined).


----------



## Chris L

http://business.financialpost.com/2...il-prices-says-king-abdullah/?__lsa=30fe-717b

"The kingdom issued an expansionary 2015 budget late last month that anticipated a deficit and Finance Minister Ibrahim Alassaf said in a pre-budget statement the kingdom could handle lower oil prices thanks to its high level of reserves. "

They don't like it either.....so use that information accordingly.


----------



## Greyhound86

I think the Saudis are saying that it is not their duty to cut production to reduce the 1million b/d oversupply. 

They are leaving it up to everybody else throughout the world to react to the low market prices and cut their capex which will eventually lead to drops in production. 

Non government entities make up all of the production in USA and Canada. Those companies have started to react to the low prices by cutting capex, having to do this to survive. The Russian companies will probably have to do the same. 

I read an analysis somewhere that if the shale oil and gas producers cut back capex the total volumes produced will come down fairly quickly as those type of wells have large decline rates in the first few years. They have to drill lots of new wells to just keep production flat.


----------



## Pluto

I think the Saudi's realize that cutting production to prop up the price just puts them out of business, so they will not cut production. From their perspective production cuts will merely help marginal producers stay alive and take their customers from them. 

OPEC is basically kaput. They don't have the power to control prices anymore. Their only lever is low prices to put marginal producers out of business and make them so scared they won't come back for a long time. I wouldn't count on production cuts at their next meeting.


----------



## supperfly17

Greyhound86 said:


> I think the Saudis are saying that it is not their duty to cut production to reduce the 1million b/d oversupply.
> 
> They are leaving it up to everybody else throughout the world to react to the low market prices and cut their capex which will eventually lead to drops in production.
> 
> Non government entities make up all of the production in USA and Canada. Those companies have started to react to the low prices by cutting capex, having to do this to survive. The Russian companies will probably have to do the same.
> 
> I read an analysis somewhere that if the shale oil and gas producers cut back capex the total volumes produced will come down fairly quickly as those type of wells have large decline rates in the first few years. They have to drill lots of new wells to just keep production flat.


I subscribe to Harold's theory. Its more between the US and Russia, this whole drop in oil prices, and Saudis are the middle man. USA blinks, the Saudis cut production, etc...


----------



## CPA Candidate

It appears that there is an economic death match going on. The strong are willing to take their licks to make sure the competition never gets back up. The potential shockwaves are being underestimated.

It's not hard to see why bond yields are dropping and stock markets are down, global financial turmoil is the story of 2015.


----------



## Pluto

I agree, supperfly17. And as AltaRed wrote in post 115, Q4 results are going to be ugly. When the results come out and future earnings projections as well, pessimism will possibly hit a new low - meaning another, possible horrific sell off in share prices - maybe back to the mid Dec lows.


----------



## gibor365

supperfly17 said:


> I subscribe to Harold's theory. Its more between the US and Russia, this whole drop in oil prices, and Saudis are the middle man. USA blinks, the Saudis cut production, etc...


I was telling it from day 1... also don't forget in what currency oil is trading... 

As per Bill Carrigan


> Long-term support lines in crude show the first one as at $51, which is where the drop should stop. The ultimate low in crude is $38.


 we'll see.....


----------



## My Own Advisor

My Own Advisor said:


> I personally can't see oil going below $50. I guess it's there now. So, I'm saying, give or take, $49 or $50, we are there. Just my guess of course.


Whoops!

$48.01
-2.03 -4.06%
5:54 PM EST


----------



## gibor365

Greyhound86 said:


> I think the Saudis are saying that it is not their duty to cut production to reduce the 1million b/d oversupply.
> 
> .


Oversupply?!









good article
http://seekingalpha.com/article/279...es-questions-and-opportunities-for-a-lifetime


----------



## lonewolf

supperfly17 said:


> I subscribe to Harold's theory. Its more between the US and Russia, this whole drop in oil prices, and Saudis are the middle man. USA blinks, the Saudis cut production, etc...


 Perhaps the easiest way for Russia to stop the USD from being the reserve currency is to capture Obama & make him a public slave. Confidence in the United States would be gone. I think it is in SA best interest to teach the big money a lesson to never invest in United States fracking . I think SA will want to drop oil price lower & keep it low for a long time to really teach the world it does not pay to bring expensive oil to the market. The lower the price of oil gets the better for SA for the world will become more dependent on a cheaper form of energy, higher oil prices brings on competition from other forms of energy & more oil being brought to market else where. Deflation is with us except perhaps there will be inflation in taxes


----------



## 1980z28

Here is what others are thinking

https://research.tdwaterhouse.ca/research/Markets/NewsArticle/1664-L6N0UM04I-1


----------



## Chris L

SA does not benefit from lower oil prices and only amounts to 1/3 of supply. This strategy will eventually fail.


----------



## gibor365

Anyway anyone buying UCO - ProShares Ultra DJ-UBS Crude Oil ... 52 weeks range 8.13 - 40.17 !


----------



## Greyhound86

gibor said:


> Oversupply?!
> 
> View attachment 3145
> 
> 
> good article
> http://seekingalpha.com/article/279...es-questions-and-opportunities-for-a-lifetime


That is an interesting article. The comments are quite a good read also.

That chart seems weird. How can demand be higher than supply every year for 20 years?

In the fine print at the bottom it states "supply and demand date are not strictly comparable since they are based on different sources and estimates"

This chart from US Dept of Energy shows supply being higher than demand but not by a crazy amount.

http://www.eia.gov/forecasts/steo/report/global_oil.cfm


----------



## gibor365

Greyhound86 said:


> That is an interesting article. The comments are quite a good read also.
> 
> That chart seems weird. How can demand be higher than supply every year for 20 years?
> 
> In the fine print at the bottom it states "supply and demand date are not strictly comparable since they are based on different sources and estimates"
> 
> This chart from US Dept of Energy shows supply being higher than demand but not by a crazy amount.
> 
> http://www.eia.gov/forecasts/steo/report/global_oil.cfm


In any case any numbers can't justify almost 60% drop in oil prices....obviously it's political manipulation


----------



## Greyhound86

yes it could be political. I honestly don't know. Hope I am still alive in 20 years when the true story finally comes out in someone's memoirs.


----------



## gibor365

Maybe sooner in Wikileaks?!


----------



## kcowan

Good explanation
Supply/demand and punishment...


----------



## AltaRed

kcowan said:


> Good explanation
> Supply/demand and punishment...


Yeah, but loses some credibility when facts are incorrect (or exaggerated)


> The US oil boom has meant that America has almost ceased importing oil and has converted its refineries from import into export.


When I see things like that, I'd add a half-shaker of salt to it.


----------



## dogcom

Supply and demand explains the price drop. It is how we got to this point is the real story as many have pointed out above.

In summary:

1. Weakening economies
2. New fuels and technologies for cars and transport.
3. SA not willing to cut production
A. To kill high cost oil like shale
B. To hurt alternatives and slow their progress
C. Probably to hurt Iran
D. Not to be the go to when cutting production 
4. US need to hurt Russia because of Syria and for not using the US dollar for everything. But not because of Ukraine being that was a US and CIA caused production 
5. China not intervening because cheap oil is a good thing for China 

There are other reasons to add I am sure.


----------



## Pluto

Just a few thoughts: 
How can we approximate the low in oil stock prices? 

My perspective is the fundamentals and the technicals are two dimensions of the same thing, so it is worthwhile to look at both, not to mention the psychological factor. 

I read in the papers that one should wait for analysts' earnings revisions before deciding to buy or not to buy oil stocks. this is the fundamentalist approach, which isn't irrelevant. But when I look at past plunges, crashes or whatever one wants to call them, stock prices precede announcements of lower earnings projections - prices bottom before analysts revise their expectations. And when I look at recoveries form crashes stock prices precede analysts' announcements of higher (expected) earnings - stock prices start going up before the revisions are done. Obviously, in order to be ahead of the game, one needs to be ahead of the analysts. this doesn't mean I ignore them, it means I don't wait for them to tell me what to do. 

What I do is use the fundamentals to identify likely survivors, and use the technicals to time buying of the survivors. That means using charts of price and volume action to increase my chances of catching the falling knife around the time it is about to stab the floor. If one waits for the analysts to confirm what we already know - things are bad - in my experience its too late to get the best price.


----------



## fatcat

dogcom said:


> Supply and demand explains the price drop. It is how we got to this point is the real story as many have pointed out above.
> 
> In summary:
> 
> 1. Weakening economies
> 2. New fuels and technologies for cars and transport.
> 3. SA not willing to cut production
> A. To kill high cost oil like shale
> B. To hurt alternatives and slow their progress
> C. Probably to hurt Iran
> D. Not to be the go to when cutting production
> 4. US need to hurt Russia because of Syria and for not using the US dollar for everything. But not because of Ukraine being that was a US and CIA caused production
> 5. China not intervening because cheap oil is a good thing for China
> 
> There are other reasons to add I am sure.


it has nothing to with anything but #3 .. period ... the saudis could push the price of oil back to 80 in a day by uttering a single sentence "the kingdom has decided to cut production by xxxxx" ...


----------



## dogcom

Weakening economies, new tech and alternatives all effect the demand side. On the supply side why is it only the responsibility of SA to cut production? Of course they are the leaders but still others can cut their production.


----------



## dogcom

I should add that SA is working on the others doing the involuntary cuts by knocking them out of business.


----------



## fatcat

dogcom said:


> Weakening economies, new tech and alternatives all effect the demand side. On the supply side why is it only the responsibility of SA to cut production? Of course they are the leaders but still others can cut their production.


no other oil producing entity in the world even comes close to the saudis when it comes to production, reserves and more important, the ability to move markets based on their stated intention regarding production ... supply is an insignificant blip in this latest collapse, it has been 95% driven by the saudis ... which is why trying to pick a bottom is useless because it entails nothing less than reading the minds of the 2 or 3 men who run the kingdom of saudi arabia ... by

and yes dog, i agree that if sa does succeed in driving high cost producers out then that would be the secondary effect of the kingdom's action and could stabilize or swing the price up ... but it could easily be knocked for a loop by sa again anythime they choose


----------



## dogcom

I agree picking a bottom using technicals or whatever won't help much when it is more in the hands of SA rather then the market. Otherwise the world economies would have to grow fast enough to overwhelm SA and increase demands in all that is energy.


----------



## fatcat

dogcom said:


> I agree picking a bottom using technicals or whatever won't help much when it is more in the hands of SA rather then the market. Otherwise the world economies would have to grow fast enough to overwhelm SA and increase demands in all that is energy.


right, and in todays environment that is not going to happen


----------



## sags

A lot of discussion on oil prices and oil companies, but who is getting their head handed to them on the wrong side of the hedging ?

There could be huge losses mounting for whoever it is...........and it could be the usual suspects.

This "oil price crisis" could very well turn into a financial crisis for these banks.

_Notional derivatives increased $2.6 trillion, or 1.1%, to *$239.3 trillion*. 
_
_Derivatives activity in the U.S. banking system continues to be dominated by a small group of large financial institutions. *Four large commercial banks represent
92.6% of the total banking industry notional amounts *and 85.9% of industry NCCE.
_
http://www.occ.treas.gov/topics/capital-markets/financial-markets/trading/derivatives/dq314.pdf


----------



## dogcom

Also what was it a month ago that the bankers had congress put in language to the effect that tax payers will be on the hook for their bad deeds. Derivatives blowing up could if things get bad enough bail in your bank accounts. That is probably not going to happen but the bankers want to survive no matter what even if it is their fault.


----------



## AltaRed

sags said:


> A lot of discussion on oil prices and oil companies, but who is getting their head handed to them on the wrong side of the hedging ?
> 
> There could be huge losses mounting for whoever it is...........and it could be the usual suspects.
> 
> This "oil price crisis" could very well turn into a financial crisis for these banks.


Could be but one must remember also that hedging costs money. The higher the commodity price an oil company hedges at, the higher the cost of this "insurance". Many companies espouse hedging because of the parasitic drain it has on financial performance AND because they have the wherewithal to manage volatility internally, e.g. the XOMs of the world. It is the smaller companies who cannot tolerate large changes in their revenue stream that are willing to buy this 'insurance' resulting in a win-win for both parties. The financial institutions are not in it only for the positive side of the bet.


----------



## lonewolf

Now they can turn water into gas.


----------



## Chris L

No $100 oil ever again: http://www.marketwatch.com/story/oil-above-100-never-again-says-saudi-prince-alwaleed-2015-01-12


----------



## Homerhomer

Chris L said:


> No $100 oil ever again: http://www.marketwatch.com/story/oil-above-100-never-again-says-saudi-prince-alwaleed-2015-01-12


never is a long time
But apart from that he pretty much confirm what some of the smart folks here were talking about, SA wants to shake the market out and they are doing fine job so far.


----------



## Chris L

Their intentions are becoming quite obvious. Will they manipulate the oil supply in the future? Yeah, probably, IF it's advantageous to do so. They could just as easily start-stop, fits and starts to screw up the high cost producers whenever they desire. Shaking out the confidence of the investors to the point where no one is going to touch it until SA is dry.


----------



## Homerhomer

and the oil is now below $46, I have a feeling GS call on oil at $39 is worth waiting for ;-), possibly won't be very long before we see it.


----------



## Toronto.gal

Homerhomer said:


> never is a long time


Especially when it comes to the most controversial & volatile commodity in the world!

Saudi caught off guard? :smug:

As the so called 'Warren Buffett of the KSA', the investor Prince, ought to know what he's talking about, so let's listen to him.

*Alwaleed, claiming he is worth $29.6bn, reportedly sued Forbes for defamation in a British court over the alleged undervaluation.*

http://www.cnbc.com/id/102153832
http://english.alarabiya.net/en/bus...Prince-Alwaleed-down-in-Forbes-rich-list.html

I'm sure the oil crash will take care of that alleged 'undervaluation' problem.


----------



## supperfly17

Homerhomer said:


> and the oil is now below $46, I have a feeling GS call on oil at $39 is worth waiting for ;-), possibly won't be very long before we see it.


We need some unrest in the Middle East to start driving that price up.


----------



## daddybigbucks

I think the oil market has to bottom out before it props up.
Too many investors are buying in right now and artificially propping up the price. When investors run out of money or courage, the market will drop 20% and then the rebuilding will begin.

Buy gold in the meantime. Same thing happened with banks then oil in 2008. Remember what happened to gold?

That's my plan anyways.


----------



## gibor365

http://seekingalpha.com/article/2812825-a-crude-oil-bottom-where-to-look-for-clues 


> Last week perhaps the greatest modern day sage in the crude oil market said enough is enough. Andrew J. Hall is an iconic oil trader who ran Phibro for decades and now runs Astenbeck Capital Management. Hall has made billions on speculations in the oil market. In his monthly letter to investors Hall wrote:
> 
> "Oil prices will stay under pressure in 2015 however, current prices are not sustainable longer term. The interplay between extreme weakness in the short term and the potential for supply shortfalls in the medium term should create attractive trading opportunities over the course of the coming 12 months."
> 
> Hall went on to write that Saudi Arabia and some other low-cost OPEC producers are seeking to drive high-cost producers from the market. He pointed out that while many assumed this is the U.S. shale drillers, many can still operate at lower prices. The most vulnerable producers operate in Canada's oil sands and deep-water production. Finally, Hall opined that $40 is an "absolute price floor" for crude oil.


----------



## gold bull9

gibor said:


> http://seekingalpha.com/article/2812825-a-crude-oil-bottom-where-to-look-for-clues


 at 40 bucks us shale is junk, that near bottom


----------



## gold bull9

daddybigbucks said:


> I think the oil market has to bottom out before it props up.
> Too many investors are buying in right now and artificially propping up the price. When investors run out of money or courage, the market will drop 20% and then the rebuilding will begin.
> 
> Buy gold in the meantime. Same thing happened with banks then oil in 2008. Remember what happened to gold?
> 
> That's my plan anyways.


 Gooold


----------



## dogcom

It should be gold but under the extreme manipulation of all markets there is no way of knowing what will do well or not. We know for sure central banks want stocks up, a stable bond market also meaning rates can't be allowed to climb and gold down by all means possible. Oil I don't think they care to much about it except to hurt Russia and they don't mind the price being down to help consumers. The only thing that might concern them is the bad debts coming out of the shale industry. 

We are dealing with central banks and not a real market so until that breaks anything is possible.


----------



## Causalien

dogcom said:


> It should be gold but under the extreme manipulation of all markets there is no way of knowing what will do well or not. We know for sure central banks want stocks up, a stable bond market also meaning rates can't be allowed to climb and gold down by all means possible. Oil I don't think they care to much about it except to hurt Russia and they don't mind the price being down to help consumers. The only thing that might concern them is the bad debts coming out of the shale industry.
> 
> We are dealing with central banks and not a real market so until that breaks anything is possible.


This stinks like the banking collapse. It's been 7 years, so time for the next bubble to burst.
It'll start with small playera default. Then some type of contagions to big companies. One or two giants like BP will go down and then gov bailout. I will wait till I see one giant go down before buying.


----------



## thepitchedlink

Well, the Saudi King is gone....think that means anything to the price of oil?


----------



## Synergy

"TD expert tells Canadian oil producers to brace for a second shock"
http://www.theglobeandmail.com/repo...-to-brace-for-a-second-shock/article22611335/



> With global production continuing to exceed demand, crude prices are set to head lower and West Texas Intermediate should average just $41 (U.S.) a barrel in the first half of this year, Toronto-Dominion Bank economist Dina Ignjatovic said in a report Friday. She expects WTI prices to sink below $40 as bulging inventories weigh on the market in the next few months.


----------



## fatcat

thepitchedlink said:


> Well, the Saudi King is gone....think that means anything to the price of oil?


no, the current king was already the defacto ruler behind the recent king


----------



## Pluto

Synergy said:


> "TD expert tells Canadian oil producers to brace for a second shock"
> http://www.theglobeandmail.com/repo...-to-brace-for-a-second-shock/article22611335/


Its not an unreasonable scenario. Of course we have to keep inn mind, the more specific a forecast is, the more likely it is to be wrong. However, the stock piling of oil on tankers is a concern. When that space is filled, the oil price seems due for another leg down, no? 

I bought oil stocks already some weeks ago. I was assuming the stocks discounted the worst in oil price. If my assumption is mistaken, and the stocks get taken down again, I'll probably buy more and hang on. In the meantime getting a 10% + dividend from cpg isn't causing me any pain.


----------



## Synergy

Pluto said:


> Its not an unreasonable scenario. Of course we have to keep inn mind, the more specific a forecast is, the more likely it is to be wrong. However, the stock piling of oil on tankers is a concern. When that space is filled, the oil price seems due for another leg down, no? I bought oil stocks already some weeks ago. I was assuming the stocks discounted the worst in oil price. If my assumption is mistaken, and the stocks get taken down again, I'll probably buy more and hang on. In the meantime getting a 10% + dividend from cpg isn't causing me any pain.


It's really anyones guess at this point, but i wouldn't be surprised to see some further weakness in the near term. It will be a great buying opportunity IMO, for longer term investors.


----------



## gibor365

Synergy said:


> "TD expert tells Canadian oil producers to brace for a second shock"
> http://www.theglobeandmail.com/repo...-to-brace-for-a-second-shock/article22611335/


Now all "experts" are so smart  Wondering what those experts were talking 6 months ago....


----------



## diharv

Synergy said:


> "TD expert tells Canadian oil producers to brace for a second shock"
> http://www.theglobeandmail.com/repo...-to-brace-for-a-second-shock/article22611335/


These so called experts have absolutely no clue what will happen 24 hours out let alone six months to one year out. They seem to take the price of the day and extrapolate that figure more or less out over the next six to twelve months. Right now it is the low 40s. A few months ago they did it with $80 . Then $60 . Etc. rinse and repeat two weeks from now.


----------



## Sasquatch

How will we know oil has bottomed?............ when they pay us to fill up our car or our furnace oil tank :biggrin:


----------



## Synergy

Did I not say that it's anyone's guess:biggrin:

Even the "experts" themselves know that it's a coin toss, but they get paid big bucks to spread the gospel.


----------



## Pluto

gibor said:


> Now all "experts" are so smart  Wondering what those experts were talking 6 months ago....


Well apparently some money managers, a minority no doubt, claim they saw it coming and sold their oil stocks last summer. The reality is, most people don't listen to them. Would you have listened, and believed them?

There are some folks claiming the general market is poised for a great fall right now. Are you going to read them, study their reasons, give them any credence? Learn to be an expert yourself, then you don't have to rely on them.


----------



## fatcat

Pluto said:


> There are some folks claiming the general market is poised for a great fall right now. Are you going to read them, study their reasons, give them any credence? Learn to be an expert yourself, then you don't have to rely on them.


there have been people, lots of people, predicting market crashes month in and month out for the last 100 years 

predicting crashes and doom is quite literally an industry unto itself

there are of course people predicting that we are on the floor of the greatest bull market in history (think Dow 50K !!!!!!!!!) but as far as i can tell the doomer books outnumber the boomer books about 10 to 1 or something

i guess its because i keep reading that humans are hardwired for danger and disaster, thats how we survive

look at zerohedge ... 24/7 doom and it is huge


----------



## Chris L

Math guarantees oil above or near $100. It's just a matter of when, not if. That or oil is replaced with other energy.

"Tensions between the restive Shiaa-majority and the Saudi-backed royal family in Bahrain further add to the concerns. Prices that allow both Oman and Bahrain to balance their budgets exceed US$100 per barrel, making them vulnerable to instability."

http://business.financialpost.com/2...-arabia-to-change-oil-policy/?__lsa=910a-9900

To the posters who mock economists for not predicting the drop in oil...you expected economists to read the minds of the SA? A human black-swan event.


----------



## supperfly17

gibor said:


> Now all "experts" are so smart  Wondering what those experts were talking 6 months ago....


Exactly, and those experts were also shocked to see BOC cut the rate by .25%.


----------



## Pluto

There are ways to filter out most of the false predictions, and using such filters, I don't act on them. If you find yourself a reliable filter you might find yourself paying attention to the more reliable predictions. 

Prior to the oil crash using such filters, I ignored positive projections for oil stocks, and so did not own any oil stocks. Recently I bought oil stocks and basically filter out the negative predictions. I will continue to hold these oil stocks until my filter for positive projections kicks in. Then I will sell the oil stocks until the next oil crash. 

An investor should learn to know when to depart form the crowd, let it exit, then step back in and use the next growing crowd as wind on your sails. That's happening right now as the quality oil stocks have risen. But always buy quality. When you look at the charts of COS and compare it to, for instance, HSE and CPG, it is clear the quality ones get the attention first as the crowd starts moving back into oil stocks - COS went into another leg down, while the other two made a higher double bottom.


----------



## Chris L

Pluto, are you looking to buy into COS? Do you think it might present some future value under certain circumstances? I see maybe another drop might make it look good, or some shift in oil policy from SA. Even with some strength in oil prices might make it a big winner.

Right now I hold HSE and BTE. I dumped a small holding of COS on the way down. I still don't like it...however, I wonder what might make it look good.

A divi cut might send it backwards...then it might be okay. Although one has to look at other potentially more profitable plays. That said, I think we're many of the stock are forward pricing oil. COS exempted.


----------



## HaroldCrump

There are conflicting messages coming out of OPEC vis-a-vis the RSA.

*OPEC’s El-Badri Says $200 Oil Possible With Lack of Spending*

One day RSA says $30, next day they say never over $100, then OPEC says $200.
I think the FUD is working out exactly as intended...


----------



## sags

The Saudis and OPEC already know the decisions they will make.........so what stops them from front running the markets in a big way, prior to their decisions which affect the market so dramatically ?

For all anyone knows they reaped in huge profits by shorting the oil markets before they made the announcements they wouldn't cut production.

The theory the Saudis are hurting because of this seem overly optimistic, when reports are they can last 10 years of low prices without breaking a sweat about it.

If they really are determined to clear the market of high cost producers..............they can and will do so.

Maybe Obama will thank the Saudis while he is there. Low oil prices are a big positive to the US economy, Europe and China.

Canada.............not so good.


----------



## HaroldCrump

sags said:


> The Saudis and OPEC already know the decisions they will make.........so what stops them from front running the markets in a big way, prior to their decisions which affect the market so dramatically ?
> For all anyone knows they reaped in huge profits by shorting the oil markets before they made the announcements they wouldn't cut production.


Nothing stops them from doing so, and they (or their associated trading entities) quite likely did front-run the market.



> The theory the Saudis are hurting because of this seem overly optimistic, when reports are they can last 10 years of low prices without breaking a sweat about it.


I believe those claims (i.e. 10 yrs.) are wildly exaggerated.
The numbers seem to indicate approx. 3 years forex reserves assuming current levels of budget spending.

However, it is likely that their welfare spending & forex reserves will be backstopped by the US.
They are a key ally in the region, esp now given the threat of ISIS - there is no way the US will let the RSA welfare state collapse.


----------



## Chris L

I heard Obama say that he was talking about all possible avenues non military to fight against Russia. I think it was at his meeting with the new King. So there's something...


----------



## sags

I think lenders especially, will be cognizant of the ability of the Saudis to execute the same exercise in the future, if they deem it necessary.

It may be a lot tougher to use oil in the ground as equity against borrowing in the future. How would the lender value it.........at $100 a barrel or $40 a barrel.

Profitable lending or a money pit for lenders ?

This one shot across the bow by the Saudis may impact oil production for a long time.


----------



## Pluto

Chris L said:


> Pluto, are you looking to buy into COS? Do you think it might present some future value under certain circumstances? I see maybe another drop might make it look good, or some shift in oil policy from SA. Even with some strength in oil prices might make it a big winner.
> 
> Right now I hold HSE and BTE. I dumped a small holding of COS on the way down. I still don't like it...however, I wonder what might make it look good.
> 
> A divi cut might send it backwards...then it might be okay. Although one has to look at other potentially more profitable plays. That said, I think we're many of the stock are forward pricing oil. COS exempted.


No I'm not looking to buy COS, and I don't see it as blue chip. Not at all my type of company. In fact oil is not my type of industry, although I did buy HSE and CPG - UP 20 & 25%. The only reason I got into these oil stocks is the opportunity presented itself, and I would be foolish not to take it. It was pretty obvious some of these stocks were decent companies, and had over reacted on the downside. I see oil stocks as a trade, not a hold forever thing. Same thing with all resource stocks - they are cyclical. Same thing with autos. They are trades, not hold forever stocks. 

But heck, I'm not against others buying COS. Its stock tends to correlate more with the price of oil, so I'd wait until a bottom in oil price is a little more clear. What's going to happen to oil price when all these tankers used for storage are filled up? All of a sudden those buyers won't be buying, but the supply will still be there. Oil could go into another tail spin, and COS with it. 

But I'm not an expert in oil or oil stocks. So I just stick with the financially more solid companies. And I will sell them some years down the road with the industry is in better shape, and the stock prices reflect that.


----------



## humble_pie

i would just like to mention that, so far, going by the posts on cmf, it's been Pluto who's called the bottom in oil. In december. Assuming the bottom is in, of course.

meanwhile i've missed the bottom, unless we get a classic W formation & a double wollop is looming. But i'm with those who look to the sideways fallen-over Ell pattern, first a steep plunge & then a long level flatline going out maybe a year.


----------



## fatcat

HaroldCrump said:


> Nothing stops them from doing so, and they (or their associated trading entities) quite likely did front-run the market.


i have to disagree with this harold .. the saudis are dealing in large sums and though i am far from an expert in oil futures and what i am sure is a rabbit hole of complex and arcane trades, i seriously doubt that the saudis could frontrun the oil market and not get caught since they would be making massive moves that would not go unnoticed

second, it would undermine whatever credibility they have quite seriously

they clearly have made a simple back of the envelope calculation that they don't need the money 

they pump 10M barrels a day, a $10 rise per barrel gives them 100M more per day

they can sneeze and jump the price $20 a barrel let alone make a really serious statement of their intentions

i don't see it ..


----------



## lightcycle

HaroldCrump said:


> One day RSA says $30, next day they say never over $100, then OPEC says $200.
> I think the FUD is working out exactly as intended...


I think there are factions within OPEC that are trying to reach out to non-OPEC members to get them to come to the table with voluntary caps. This might be a veiled message to them: "Rein in your production, then we all feast together".

Or... my tinfoil hat might be on a bit too tight...


----------



## HaroldCrump

lightcycle said:


> I think there are factions within OPEC that are trying to reach out to non-OPEC members to get them to come to the table with voluntary caps. This might be a veiled message to them: "Rein in your production, then we all feast together".
> 
> Or... my tinfoil hat might be on a bit too tight...


The largest non OPEC producer is.....Russia.
Does OPEC have any standing whatsoever with Russia to even dare to ask them to cut production?
After the sanctions imposed on that country, leading to the currency trashing, and now finally a ratings downgrade by the S&P.

If Russia does even come to the table with OPEC, they will demand several concessions in exchange for their cuts to production.
Such as USD swap agreements at a predetermined USD-to-Ruble rate that is more favorable that current rates.

Then there is Norway....they _could_ cut production given that they are a very high cost producer.
If oil stays at these levels, Norway will eventually cut some production, along with Canada.


----------



## HaroldCrump

fatcat said:


> i have to disagree with this harold .. the saudis are dealing in large sums and though i am far from an expert in oil futures and what i am sure is a rabbit hole of complex and arcane trades, i seriously doubt that the saudis could frontrun the oil market and not get caught since they would be making massive moves that would not go unnoticed


Saudis bring big money to the table.
They control foreign hedge funds through a network of subsidiaries and investment banks.

With oil's slide since last summer, anyone short would have made a lot of money.
It'd be hard to prove who is behind who, and who had inside information, and who didn't.

Also, it does not have to be big bets or large trades.
Several trades spread across several hedge funds/private funds globally would not be unusual.

I agree that the Saudis probably do not _need_ the money.
But very few can resist the temptation to trade on inside information :biggrin:


----------



## fatcat

HaroldCrump said:


> Saudis bring big money to the table.
> They control foreign hedge funds through a network of subsidiaries and investment banks.
> 
> With oil's slide since last summer, anyone short would have made a lot of money.
> It'd be hard to prove who is behind who, and who had inside information, and who didn't.
> 
> Also, it does not have to be big bets or large trades.
> Several trades spread across several hedge funds/private funds globally would not be unusual.
> 
> I agree that the Saudis probably do not _need_ the money.
> But very few can resist the temptation to trade on inside information :biggrin:


all true ... i do think they are conscious of their power and especially their ally, the usa would be very red-faced if the saudis got caught frontrunning ... as you say, the complexity obviates any kind of dramatic reveal


----------



## 1980z28

When COS drops dividend


----------



## My Own Advisor

LOL. You know, you might be right!


----------



## 1980z28

Holding a lot,when it was at 19.00,,,,, dollar cost to 10.00 so far,,,,,will have to chase it down another couple thousand shares plus

Hoping for a drop(dividend)

Watch the volume go to 10 million ( maybe )

IMHO maybe see 40 dollar oil,sold some stuff that was up to balance for the downside to come:frown:


----------



## 1980z28

Possible a value trap

So sad


----------



## Pluto

Video: @ 50 oil, 80% of Can companies go bust. 


http://www.bnn.ca/Video/player.aspx?vid=539335


----------



## Chris L

Pluto said:


> Video: @ 50 oil, 80% of Can companies go bust.
> 
> 
> http://www.bnn.ca/Video/player.aspx?vid=539335


What will the CAN economy look like without profitable oil companies?

-> At $50 oil, all oil companies suffer.


----------



## Fraser19

Chris L said:


> What will the CAN economy look like without profitable oil companies?
> 
> -> At $50 oil, all oil companies suffer.


So it looks like we may be soon facing a much bigger problem than what is happening in the oil sector.


----------



## fatcat

Pluto said:


> Video: @ 50 oil, 80% of Can companies go bust.
> 
> 
> http://www.bnn.ca/Video/player.aspx?vid=539335


bill bonner talking about cenovus' recent capex cut (but output maintenance) says that cenovus can make money at 40-42 wti 

http://www.bnn.ca/Video/player.aspx?vid=540082

their dividend might be going however


----------



## Synergy

Fraser19 said:


> So it looks like we may be soon facing a much bigger problem than what is happening in the oil sector.


Are you talking about StatsCan downward revision on job growth?


----------



## humble_pie

i don't think BNN's Jameson Berkow said anything as simple as X percent of oilcos are going to go bust.

i believe he said hedging can save the hedgers for a period of time.

he nodded at 2015 heavy hedgers but did not go any further out in time.


----------



## Fraser19

Well it was really more of a question than a statement. Guess I dropped the ball on that one.

Where my head is at today, I have concerns about several things. For instance I work for an addictions treatment program. A lot of our clients are from the oil industry, suncor shell, syncrude and baker huges. If we stop getting them we will lose 1/3 of our business. Also I live in a oil town in east Alberta. I have seen massive layoffs in the transport industry construction and naturally direct oil services. 

Realistically where I live if there is no drilling, there is no reason for this city to be inhabited. It makes me wonder how many other industry's will be deeply hurt due to falling oil?

At this point I am just trying to rapidly clear away debt in my life. I feel uncertain about the future.


----------



## humble_pie

is the cup half empty or is it half full ...

in your line of work, would you not have collected enough colourful material for a suite of books plus a couple of movies, though


----------



## Fraser19

humble_pie said:


> is the cup half empty or is it half full ...
> 
> in your line of work, would you not have collected enough colourful material for a suite of books plus a couple of movies, though


Not totally following you here.
If you were to say this in another way, what might it look like?


----------



## humble_pie

it is a bit obscure, so sorry! i meant there have to be a few oscar-winning movie boards about addicted tycoons & how the stress of late 2014-15 is afflicting them even further.

turning to reality, though, the eastern Alberta city you describe must indeed be vulnerable to the news. I am sorry about that. You do sound on top of things, ie working actively to clear debt, monitoring closely, in fact being able to acknowledge that it's appropriate to feel uncertain is an excellent step imho.

i think if i were working in a small city that was heavily dependent upon one industry - an industry whose history was one long boom-or-bust moreover - i might seek out oldtimers to ask how they got through such periods in the past. Often i find the words of the elders - the ones who have already walked the walk - to be the most reassuring.

for example, you mentioned up to 1/3 of the clientele at your treatment center could vanish. Heavy though this loss would be, it still leaves 2/3s of the clients in place. A well-managed business can run on that. In what ways might the staff, for example, contribute to the enterprise during its critical down period? would all personnel accept pay reductions & 4-day workweeks for a time, so that no one would lose his or her job?

there would be some attrition to the payroll, which would help. But the above is only one among hundreds of ways that a business could close ranks & survive even a crippling downturn.


----------



## fatcat

a very interesting and well informed discussion on bloomberg about oil from seth kleinman, head of european energy research at citigroup

http://media.bloomberg.com/bb/avfile/News/Surveillance/vEwX42DFhfzI.mp3

takeaways:

- this is overwhelmingly a supply problem not an underlying economic problem
- in 12-18 months a million barrels will be gone based on well shut down and infrastructure destruction 
- he then sees oil settling between 50-70
- the saudis have the capacity to add significant supply to their current output (their cost is $4-5 a barrel)


----------



## sags

US oil inventories are at record high levels of 407 million barrels.

Last week 9 million more barrels were added to the inventory. The estimates for weekly oversupply were from 4-13 million barrels.

It appears production hasn't slowed significantly yet.

http://www.reuters.com/article/2015/01/28/us-markets-oil-idUSKBN0L107120150128


----------



## HaroldCrump

It seems that $50 - $55 is the "sweet" spot for the Saudis.
At that level, a large number of high cost shale & oil sands producers start to become uneconomical after about 1 - 1.5 years.
But that level does not hurt the Saudis too much.
For this strategy to work out for the Saudis, oil has to stay range-bound between $45 - $65 for at least 1.5 years.


----------



## Chris L

HaroldCrump said:


> It seems that $50 - $55 is the "sweet" spot for the Saudis.
> At that level, a large number of high cost shale & oil sands producers start to become uneconomical after about 1 - 1.5 years.
> But that level does not hurt the Saudis too much.
> For this strategy to work out for the Saudis, oil has to stay range-bound between $45 - $65 for at least 1.5 years.


However, with oil at half-price, to match total revenue, they need to boost market share x2!

$100 oil just sounds so much simpler and they will try to achieve this first by cutting out producers and reducing the supply that way. Next move...for them....?

Are you saying they don't care about total revenue anymore, they only care about maintaining their current market share?

Doesn't make sense to me. If they don't care about revenue...they could just stop selling oil altogether.

I very much doubt that the Saudis are "comfortable" with oil at $50. They can tolerate it, for sure, but only in comparison to high cost producers. The end game is not oil at $50. The end game is making revenue as if they retain market share and produce the same revenue. 

Perhaps the next step for them is to double market share. In that case...game over Canada.


----------



## Pluto

I'm not convinced SA can double production; if so they can't double market share. They are basically waiting until enough marginal producers pack it in allowing for price increase. They have no choice but to do what they are doing.


----------



## fatcat

Chris L said:


> However, with oil at half-price, to match total revenue, they need to boost market share x2!
> 
> $100 oil just sounds so much simpler and they will try to achieve this first by cutting out producers and reducing the supply that way. Next move...for them....?
> 
> Are you saying they don't care about total revenue anymore, they only care about maintaining their current market share?
> 
> Doesn't make sense to me. If they don't care about revenue...they could just stop selling oil altogether.
> 
> I very much doubt that the Saudis are "comfortable" with oil at $50. They can tolerate it, for sure, but only in comparison to high cost producers. The end game is not oil at $50. The end game is making revenue as if they retain market share and produce the same revenue.
> 
> Perhaps the next step for them is to double market share. In that case...game over Canada.


he end game may have more to do with security than oil ... a self sufficient north america isn't going to send the saudis nearly as much love as they have in the past ... the saudis want to be wanted



> I'm not convinced SA can double production;


 right, they can't just double market share and why would they try to exhaust their supplies twice as fast at half the price ?


----------



## HaroldCrump

Chris L said:


> However, with oil at half-price, to match total revenue, they need to boost market share x2!


They plan to do so by driving out the "high cost" producers like US shale, Canadian oil sands, some offshore drilling, etc.



> Next move...for them....?


Slowly reduce supply, and let the price go up.



> Are you saying they don't care about total revenue anymore, they only care about maintaining their current market share?


_*I *_am not saying that...that is the official position.
They have said repeatedly that they want to regain market share, don't want to cut production, any production cuts must come from "less efficient" producers, blah blah blah.

I have already said several times what I think.
I don't think driving out high cost producers is the _*only*_ motive.



> I very much doubt that the Saudis are "comfortable" with oil at $50.


Not on a long-term basis, but for 2 - 3 years, yes I think they will be fine.
Keep in mind that they have very large forex reserves to fund their welfare state.
They also have the full backing of the US to ensure that welfare state stays in force.

As you said, $50 is not the long-term goal of their policy.


----------



## AltaRed

Harold has got it right, or at least the way I have seen it since November. It makes perfect sense to squeeze out the high cost producers to ultimately support price longer term. The faster high cost producers pick up their marbles and go home, the sooner oil prices will recover.


----------



## Cal

It is a little different than the last oil down turn, where demand was less than production, now production is intentionally beyond demand. Plus the companies don't have the recent buffer of expensive oil to pad this downturn.


----------



## Fraser19

I am curious as to what people think about the current rise in oil prices.
So we see this as at temporary jump or an entry into a more stable price?

I know no one can properly predict the prices, but what are your thoughts for today?


----------



## fatcat

Fraser19 said:


> I know no one can properly predict the prices, but what are your thoughts for today?


my thoughts are that the price of oil is being set by macro events and prediciting the price direction is like predicting the saudi king's next fart ... impossible 

http://www.nytimes.com/2015/02/04/w...n-region&region=top-news&WT.nav=top-news&_r=0


----------



## Beaver101

^^ Consult the 2015 Predictions Contest - somebody will get it right or close. :biggrin:


----------



## Flash

Looking to buy 2 stocks out of CNQ, HSE and SU. Any points which I should go with. Which of the 3 would see the biggest gains when (either weeks, months or even years) oil will be back up to $70-$80+? I know these 3 can withstand a few years of low oil prices
Right now I'm tending to go for HSE and CNQ.


----------



## nobleea

Flash said:


> Looking to buy 2 stocks out of CNQ, HSE and SU. Any points which I should go with. Which of the 3 would see the biggest gains when (either weeks, months or even years) oil will be back up to $70-$80+? I know these 3 can withstand a few years of low oil prices
> Right now I'm tending to go for HSE and CNQ.


%-wise, I would say HSE. Bonus is that it has the highest yield right now.


----------



## 1980z28

fatcat said:


> my thoughts are that the price of oil is being set by macro events and prediciting the price direction is like predicting the saudi king's next fart ... impossible
> 
> http://www.nytimes.com/2015/02/04/w...lumn-region®ion=top-news&WT.nav=top-news&_r=0


Ha Ha

+1


----------



## Flash

nobleea said:


> %-wise, I would say HSE. Bonus is that it has the highest yield right now.


Ye, looking for both share price going up and hopefully dividend increase.

HSE was my first choice too. For my 2nd, I'm torn between CNQ and SU.


----------



## AltaRed

Why pick a stock strictly nased on yield? It is Total Return that matters long term.


----------



## Toronto.gal

Bonuses don't come for free. The highest yield HSE was also the one that dropped the most since the highs of 2014 [-43% vs. -37% & -34% for CNQ/SU respectively]. 

All announced big capital spending for 2015 from $1B to $2.4B.

Q4 for SU is 2day; HSE follows next week I believe & CNQ in March.


----------



## Flash

Honestly, I would rather go for equities that provide the highest dividend yield and yield increases, as my plan is to gather up equities and live off dividend returns without dipping into the capital invested. I'm not looking for capital gains by selling stocks.

My end target would be to have a 1mil (invested) portfolio 20 year time from now, and if I manage to get 5% back, that would net me a 50k yearly just from dividends, and I would be able to live very comfortably (basically making more from dividends that I currently make from my job). Profits putting me over 1 mil from capital gains on paper would be a bonus if I would ever want to sell out.

So if HSE will continue increasing their dividend yield, giving me a higher % than CNQ or SU would, I'd be fine with that.


----------



## humble_pie

back to topic (although discussions of yield are just as critically important imho) we should all give credit where credit is due ... only one person called the december lows in oil & that person was Pluto

yay! 

we might take back the châpeaux though, if oil drops the other leg in a double bottom each:


----------



## Toronto.gal

fatcat said:


> predicting the price direction is like predicting the saudi king's next fart ... impossible


More difficult even.


----------



## humble_pie

fatcat said:


> ... prediciting the price direction is like predicting the saudi king's next fart ... impossible



yet Pluto did it effortlessly & correctly, with no reference to desert kingdoms or gaseous emissions


----------



## sags

Double bottom coming, if you believe the CEO of BP.

He forecast 3 years of low oil prices. He said there is a worldwide glut of oil and when companies are storing it on tanker ships, there will be low prices for awhile.

Other news tidbits and reports..........

1) Calgary housing is reported by BNN as "imploding". A price correction of up to 30% is possible.

2) James Doakes said on BNN, there are too many small oil companies. Everybody wants to start an oil company and be the CEO and earn $800,000........he said.
(He described a small company that is pumping 160 barrels a day from horizontal fracking. At $100 a barrel it is profitable. At $50 they are going out of business.)

3) He also said that either approved or not, Keystone Pipeline is dead. Nobody is going to pay $9 a barrel to ship $50 oil to the Gulf Coast.

4) Earlier, I listened to an analyst who made sense of the question of why big oil companies aren't swooping up small companies on the cheap. He said they will wait until the companies go bankrupt and their land leases return to the government or owners, and they will bid on those for less than the original contract. The "assets" of these small companies beyond their land rights..........are far less than their debts.

All in all the chances of someone buying oil stocks of small companies and ending up the bag holder............are pretty high right now.


----------



## gibor365

AltaRed said:


> Why pick a stock strictly nased on yield? It is Total Return that matters long term.


Depends  When I'm retired, I want to live fromdividends...and I don't really care how will appreciate stock I hold in 40-50 years


----------



## Flash

gibor said:


> Depends  When I'm retired, I want to live fromdividends...and I don't really care how will appreciate stock I hold in 40-50 years


Pretty much this. However, there is a correlation between yield and stock price. If stock price bottoms, most likely so will dividend. But some do increase more in yield than appreciation while other appreciate more, while dividend yield stays low. I am most interested in the former.

I will probably go with SU instead of CNQ


----------



## AltaRed

Flash said:


> Pretty much this. However, there is a correlation between yield and stock price. If stock price bottoms, most likely so will dividend. But some do increase more in yield than appreciation while other appreciate more, while dividend yield stays low. I am most interested in the former.
> 
> I will probably go with SU instead of CNQ


That was the stock answer I was expecting. Dividend investing has been especially fashionable the past several years but that will change somewhat once interest rates rise back to more normal levels even if it takes 10 years. Dividend investing will not be nearly as attractive then. Stocks should be picked baed on the fundamentals, with yield, or better yet, dividend growth one of the criteria.

The government can change taxation rules at any time for dividends and/or capital gains. Also, dividends are a ***** when they impact OAS clawbacks. It thus pays to have a balance and that is what total return is all about. Taking some profits now and then to pay annual expenses is really no different than using dividends. Both sources of money come out of the underlying business.

Thus, I am saying it is nonsensical to pick HSE over CNQ or SU just because HSE has a higher yield. Indeed, I see the high dividend as primarily a vehicle for the majority owner to take profits out of HSE for other purposes. I am not trustful of the owner's motives.

That said, all things being equal, I prefer my stocks to have at least some dividend. That tends to keep management a bit more honest in their financial decisions. Both CNQ and SU are on my watch list for when this oil roller coaster finally shows some solid direction. HSE will likely never be on my buy list.


----------



## Flash

AltaRed said:


> That said, all things being equal, I prefer my stocks to have at least some dividend. That tends to keep management a bit more honest in their financial decisions. Both CNQ and SU are on my watch list for when this oil roller coaster finally shows some solid direction. HSE will likely never be on my buy list.


Valid points. I am still very new at this. Can you please tell me your reasons why CNQ & SU are your picks but HSE never will be? If you can take it via PM that would probably be better as to not de-rail the thread. Lots to learn I have


----------



## AltaRed

Simple reasons. Do not like Husky because Li Ki Shing could have personal motives for Husky such as using it as a cash flow tool to fund his other endeavours, Husky is only part of his $32B empire, Husky's operations offshore China are at the whim of the current Chinese regime and at risk if there is a falling out between Li and the current administration. Is China any better ultimately than Russia at confiscation?

CNQ and SU on the other hand have most of their operations in Canada, have excellent balance sheets, have either downstream operations (SU) or considerable light oil and NG operations (CNQ) and CNQ is run by some of the best brains in the business. Additionally, they can conserve more cash in times of crisis that would otherwise be bled off through excessive dividend payments. 

I am too busy on Hawaiian beaches at the moment to pull up some fundamentals but check out things like P/CF, ROE, Debt ratio, ROCE, etc. on these companies and ignore dividend yield as a primary selection criteria.


----------



## Flash

Ok, will look into that. You obviously know more about these companies than just some report numbers.
Any comment on CVE?


----------



## gibor365

> Dividend investing has been especially fashionable the past several years but that will change somewhat once interest rates rise back to more normal levels even if it takes 10 years.


 in this case dividend possibly will also increase  I'm not telling that you need to buy only based on yield, but if all other fundamantals are similar, I'd prefer to buy stock with higher current yield than on current low yield and higher dividend growth.... in I was in my 20's, not close to 50  my approach will be probably different



> why CNQ & SU are your picks but HSE never will be


I hold all of them


----------



## AltaRed

That is perfectly fine. Different opinions is what makes a market. My main objection was directed at yield as an important criteria.

It is an easy criteria to use as the basis for retirement cash flow and cheers to those who will have the luxury to do that (I include myself in that lucky bunch) but 95% of Canadians will never achieve that. In which case, they need to pursue Total Returns as the way to get the most from their capital.


----------



## AltaRed

Flash said:


> Ok, will look into that. You obviously know more about these companies than just some report numbers.
> Any comment on CVE?


Not necessarily. I am simply saying one must look at the fundamentals when making investment decisions (which may well be different criteria if making trading decisions).

I am not familiar enough with CVE metrics to comment about how CVE would rate against SU or CNQ, but I am aware it has number of good assets, decent management, downstream refining and a good balance sheet. It will be one of the survivors but I would look at 1Q15 results when they come out to get a better feel of their robustness.

FWIW, I only own a partial position in CNQ at the moment with no other exposure to O&G, and am unlikely to own any more until at least after 1Q15 results or as some have referred to it elsewhere a possible double bottom in oil. IOW, more bad news likely to come yet in in this sector. I have seen and survived too many of these crises in the last 40 years.


----------



## gibor365

> It is an easy criteria to use as the basis for retirement cash flow and cheers to those who will have the luxury to do that (I include myself in that lucky bunch) but 95% of Canadians will never achieve that. In which case, they need to pursue Total Returns as the way to get the most from their capital


 probably 95% is a correct number, as to live from dividends couple need to have at least 1 mil and no debt... on the other hand, what % from those 95% invest in equities at all?!


----------



## AltaRed

gibor said:


> probably 95% is a correct number, as to live from dividends couple need to have at least 1 mil and no debt... on the other hand, what % from those 95% invest in equities at all?!


I suspect, most people other than the very conservative older demographic are into equities to some degree, even if by default through high MER mutual funds sold to them by bank branch advisors. Ultimately better than no equities most of the time though most of us here know most actively managed funds underperform the market overall. Better than 100% GICs though most of the time.

I know some people with RRSP/TFSA portfolios in the $100-300k range and they all have some equity mutual funds in their mix. Most of those folks are into total return investing, in part, by default.


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## jcgd

gibor said:


> Depends  When I'm retired, I want to live fromdividends...and I don't really care how will appreciate stock I hold in 40-50 years


It's still total return that matters long term. One million yielding 4% is still more than $500k yielding 4%. Regardless of your dividend growth, the total yield is what matters. Even if you wish to live off dividends you still want a higher total return.


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## gibor365

> Most of those folks are into total return investing, in part, by default.


 That's right  ... but imho you overestimate number of people who are invested in equities... I work in IT financial industry and practically all employees in mid age 30-50 ... except our GRRSP, very few are invested even in MFs, maybe 2-3 guys from 20 I know, have discount brokerage accounts...


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## gibor365

jcgd said:


> It's still total return that matters long term. One million yielding 4% is still more than $500k yielding 4%. Regardless of your dividend growth, the total yield is what matters. Even if you wish to live off dividends you still want a higher total return.


You are talking like appreciation of your portfolio guaranteed  
IMO, living from dividends from Canadian banks, FTS, EMA, BCE, JNJ, PG, UL. MO etc... is much more secure than invest into GOOG or AMZN and hope on good appreciation... If you too concentrated on appreciation in order to get mil from 500K, you may end up with 200K 



> It's still total return that matters long term.


 as I said, not for me....I don't care what will be total return in 40 or 50 years, as I won't be alive there.... We're planning to live on dividends and principle to leave to my kids ...they will already decide based on their priorities how to manage portfolio..


Also, if you buy dividend stock , it doesn't mean you don't get appreciation ... as an example i bought 2 years ago LMT (if yield would be less than 4% , i wouldn't buy it)... in 2 years my appreciation is 276% and yield on cost 6.9%


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## Beaver101

gibor said:


> ...
> 
> as I said, not for me....*I don't care what will be total return in 40 or 50 years,* as I won't be alive there.... We're planning to live on dividends and *principle to leave to my kids* ...they will already decide based on their priorities how to manage portfolio


 ... so I guess you don't believe in buy, hold and next generation to prosper? :biggrin: Okay, back to you ... this is getting off topic.


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## fatcat

gibor said:


> You are talking like appreciation of your portfolio guaranteed
> IMO, living from dividends from Canadian banks, FTS, EMA, BCE, JNJ, PG, UL. MO etc... is much more secure than invest into GOOG or AMZN and hope on good appreciation... If you too concentrated on appreciation in order to get mil from 500K, you may end up with 200K


gibor, i think you are caught up in the "living off your dividends" meme ... the coupon clipping dream of just watching the divvys roll in and go up ... i can relate because i think the same way and have mostly (but not entirely by any means) dividend growers and solid dividend paying companies

you (me) are focussed on the dividend stream as if it has some magic versus non-dividend growth companies ... the mere fact that a company has paid and raised divvys in the past doesn't mean it will in the future and more important it doesn't mean it's stock price will appreciate at a rate that makes total return better than pure growth companies

you have to have both, dividend payers _and_ growth

it is entirely possible to have a pure growth portfolio and sell some of it off every quarter in retirement and end up with a similar income stream as the dividend growth people

the math seems so simple on dividend growth .. the clean separation of "spending money" (dividends) from capital is a bit of head fake in my opinion

though, like you, i love the fantasy as well


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## gibor365

> it is entirely possible to have a pure growth portfolio and sell some of it off every quarter in retirement and end up with a similar income stream as the dividend growth people


I just don't want this dilemma ...what to sell, when to sell, time the market .... and think about big recession.. you would sell at very bad prices... 
dividend stream can be exactly what is RRIF minimum withdrawal ...so no headache 
and I agree that you need "potential" growth ... thih is why I have equities like QQQ


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## fatcat

gibor said:


> I just don't want this dilemma ...what to sell, when to sell, time the market .... and think about big recession.. you would sell at very bad prices...
> dividend stream can be exactly what is RRIF minimum withdrawal ...so no headache
> and I agree that you need "potential" growth ... thih is why I have equities like QQQ


i also have qqq ... my only etf and i plan to add more ... lots of great growth companies in there


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## gibor365

fatcat said:


> i also have qqq ... my only etf and i plan to add more ... lots of great growth companies in there


btw, there is also TDIV First Trust NASDAQ Technology Dividend Index Fund., NASDAQ stocks who pays dividends...don't hold it , but may  ... it's cheaper P/E = 16.9 than QQQ 22.3


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## AltaRed

gibor said:


> That's right  ... but imho you overestimate number of people who are invested in equities... I work in IT financial industry and practically all employees in mid age 30-50 ... except our GRRSP, very few are invested even in MFs, maybe 2-3 guys from 20 I know, have discount brokerage accounts...


I agree there are few of us that are DIY with discount brokerages but what are all thise mutual fund advisors doing in all those bank branches and what are all those stockbrokers doing in all those full service brokerages? They are not paid to be furniture.


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## dime

Do technical analysis...on XLE and USO. Look for at least a double bottom on the weekly tick chart, and then enough of a new uptrend that breaks above the old major bear trend down. Look for a surge in above average volume on a positive close. Look for confirmation on the following day. 

But it's been such a massive move downwards, I'd want to see a solid evidence that we're not just having a 'dead cat bounce' on the way down deeper into the $40s afterwards. There's stories of all kinds of tankers out there just floating in the ocean full of oil, and they'll stay there until the price rises in 3 years, bringing more supply back to market, holding prices down. 

Look at the annual forward earnings estimates of XOM, CVX, ESV, ATW and other big oil. You'll notice they all suck right now. Some analysis expect lower earnings by big oil far into 2018. I'm worried about div cuts with all the high payout ratios. I want to see some revision upwards and the potential for increased earnings. There's companies with better growth potential and with rates rising in the US anything with yield and no earnings growth are going to drop when rates rise. What happens when the high yield debt isn't repaid by all these risky cyclical oil ventures? Another wave of selling will high high yield bonds. 

There's deflationary risk out there across the global markets keeping commodities low right now as well. Look at copper's massive drop over the past year or so. What's going to happen with Greek exit, Russian default, port authority closure, China slowdown, etc etc

All that being said, there's upside for a patient investor... considering it's a non-renewable resource. Geopolitical risk of conflict also adds upside. China, Taiwan, North Korea, Ukraine, Russia, Syria etc always a powder keg waiting to go off. 

It's such a crap shoot and we can just speculate. I could even feel 90% confident about what's 'sure to happen' and then something blind sides us all. There's so many factors.


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## Pluto

Recently it seems there is a feeling of safety in buying oil stocks. For example, 

http://www.marketwatch.com/story/if...ok-at-energy-stocks-2015-04-09?link=MW_Nav_TD

http://www.cnbc.com/id/102574611


My personal opinion is the safest time is when pessimism is at its height, but that's assuming one is buying quality. I have been told one can not know when pessimism is maximized until after, and one can not know bottoms in markets until after. True, one can not know them with absolute precision, but there are markers that approximative maximum pessimism, and bottoms. One marker I used last Dec was the emergence of an extreme prediction in the media way lower than what others were claiming: "Oil could go to $20 a barrel". To me that was one sign of maximum pessimism and was a contributing factor in buying oil stocks. 

Now that some feel safer, and pessimism is not so extreme, my oil stocks are about 20% above my purchase price. Those who wait for the extreme prediction to materialize miss out. 

Now, I think, we can do the reverse, and ask, how will we know oil has topped out? Of course this will not likely happen for many years. But when it does, the opposite of pessimism will be in play - Oil at 100 or more, and extremely optimistic projections of oil going up to 200 and higher along with rig counts near historical highs will approximate a top. That's when I'll sell and make a tidy profit. Those who hang on for the extreme high prediction to materialize end up going over the water fall.


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## Ag Driver

Pluto said:


> Recently it seems there is a feeling of safety in buying oil stocks. For example,
> 
> http://www.marketwatch.com/story/if...ok-at-energy-stocks-2015-04-09?link=MW_Nav_TD
> 
> http://www.cnbc.com/id/102574611
> 
> 
> My personal opinion is the safest time is when pessimism is at its height, but that's assuming one is buying quality. I have been told one can not know when pessimism is maximized until after, and one can not know bottoms in markets until after. True, one can not know them with absolute precision, but there are markers that approximative maximum pessimism, and bottoms. One marker I used last Dec was the emergence of an extreme prediction in the media way lower than what others were claiming: "Oil could go to $20 a barrel". To me that was one sign of maximum pessimism and was a contributing factor in buying oil stocks.
> 
> Now that some feel safer, and pessimism is not so extreme, my oil stocks are about 20% above my purchase price. Those who wait for the extreme prediction to materialize miss out.
> 
> Now, I think, we can do the reverse, and ask, how will we know oil has topped out? Of course this will not likely happen for many years. But when it does, the opposite of pessimism will be in play - Oil at 100 or more, and extremely optimistic projections of oil going up to 200 and higher along with rig counts near historical highs will approximate a top. That's when I'll sell and make a tidy profit. Those who hang on for the extreme high prediction to materialize end up going over the water fall.


I like your theory. Mimics what we had seen in gold prices over recent years.


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## dogcom

Except in extreme situations like 2011 top in gold and silver, you really can't buy extreme pessimism for a bottom because of the ridiculous amount of manipulation in the market if you can call it a market. Gold and silver are run by central banks, governments and bullion banks through the paper markets and what normal investors do doesn't matter at all in the market except to provide more money to manipulate.


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## Pluto

I thought I'd revisit this thread to see how smart or dumb I was. I'm actually down 50% on cpg, and 46% on HSE . Since I didn't buy at the top, I guess I'm not that dumb. But bought too early, obviously so not super smart either. Mercifully, I have 90% cash and short term bonds to use to buy (non oil) stock when the current carnage plays out.


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## peterk

gibor said:


> I just don't want this dilemma ...what to sell, when to sell, time the market .... *and think about big recession.. you would sell at very bad prices... *


Dividends are certainly "easier" in that regard. But to your point about recessions and down markets. Taking your dividends for income during a down market is just as bad as selling stock for income in a down market. One is fooling themselves when they say things like "I don't care what the market does as long as my dividends keep paying and growing". Dividend payments affect the stock price. If you were taking a 4% yield out before you are taking a 6% yield out after a market correction. 

Even the dividend collecting retiree, who cares not about market fluctuations, should endeavor to cut expenses and reinvest dividends during a market downturn, and may afford to loosen the purse strings and spend a little more after big market runups.


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## gibor365

> I have 90% cash and short term bonds to use to buy (non oil) stock when the current carnage plays out.


 I have currently 48% in Cash and FI and this number is increaseing avery couple of days.... won't be very surprised to see than my Cash portion becomes also 90%


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## Eclectic12

peterk said:


> Taking your dividends for income during a down market is just as bad as selling stock for income in a down market.


One has extra costs (sell commissions) while the other does not so I am not convinced.




peterk said:


> If you were taking a 4% yield out before you are taking a 6% yield out after a market correction.


Hmmm ... nobody seemed concerned with these swings. In some cases, the executive could not have been concerned as they raised the dividend during the swing period.


In any case, this "dividends are removing growth one would have had in a non-dividend paying stock" seems like an academic exercise that does not survive what happens in the real world. 

For whole sectors (particularly in Canada) deciding "stock A" is a good investment locks on into dividends as *there are no comparable alternatives*. Even the S&P500, from what I recall of another thread is something like 75% dividend payers.

Lots can be debated but if there is no alternative (the quality of the investment is deciding ... not dividends or no dividends, correct), it seems moot.


As for the "re-invest dividends" ... maybe. Most brokers are synthetic DRIPs so most investors aren't going to easily be able to take care of it all seamlessly.


Cheers


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## zylon

> *Alberta fires may double in size, last for weeks*
> 
> Royal Bank of Canada estimates that as much as 1M bbls/day of production has been shut, or *~40% of oil sands output *
> 
> http://seekingalpha.com/news/318092...e-size-last-weeks-1m-bbls-day-knocked-offline



upload image


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## Pluto

40% shut. Wow. Less to transport out of there. I wonder which pipline(s) may be negativly impacted.


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## Pluto

BTW, Saudi Oil Minister just got fired. Hope he doesn't lose his head.


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## zylon

Pluto said:


> 40% shut. Wow. Less to transport out of there. I wonder which pipline(s) may be negativly impacted.


It's in the link above:




> Among pipeline companies, no assets have incurred significant damage, but Enbridge (NYSE:ENB) shut all pipelines in and out of Cheecham Terminal, Inter Pipeline (OTCPK:IPPLF) shut parts of its system in the province, and Keyera's (OTC:KEYUF) South Cheecham rail and truck terminal is shut down; TransCanada (NYSE:TRP) says it does not expect the fires to affect deliveries of natural gas.


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## Chris L

With 1 million offline, what hasn't the price of oil reacted?


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## Chris L

Pluto said:


> BTW, Saudi Oil Minister just got fired. Hope he doesn't lose his head.


Interesting. I thought he was doing a great job keeping oil prices down for his country. Perhaps the next guy will be able to speak Iranian. Then again, they could just cut supply. That would be nice.


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## Pluto

Chris L said:


> With 1 million offline, what hasn't the price of oil reacted?


don't know. I'm guessing that they see it as a very temporary setback with plenty of oil in storage, so it is a big yawn for them. 

Maybe its a clue that we should not expect any near term (6 months) significant rise in oil price.


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