Almost immediately after I made the call that oil has made a temporary peak, trouble breaks out in the middle east between Israel and Lebanon. Oil almost immediately broke the old high and is currently settled at $77. I guess that's the risk of putting my neck out and making a call. I will continue to monitor the price action of crude prices to determine if it is wise to be long again in oil.
But one thing worth noticing is that the price of Crude stocks in service and exploration are still 10% or more below their peak when crude prices reached $75 previously in May. What this tells us is that investors do not believe that the current crude prices are sustainable long enough for oil companies to benefit. In other words, the current spike in crude prices is temporary due to uncertainty of war between Israel and Lebanon. There is at least a $15 war premium built in to the price of crude today.
Further, the liquidity problem today has dampened speculation capital. Another reason worth noting for the continuous decline in equity prices.
Apple computers has been a favorite short of mine recently. The volume and price action of this stock is not bad for trading. I've been shorting it on and off since it was about $60. It closed at $50.67 this Friday. The problems of Apple are many and beyond the scope of this entry but I'd thought I'd mention what I've been doing in the markets recently.
Sunday, July 16, 2006
Middle East Tension
Almost immediately after I made the call that oil has made a temporary peak, trouble breaks out in the middle east between Israel and Lebanon. Oil almost immediately broke the old high and is currently settled at $77. I guess that's the risk of putting my neck out and making a call. I will continue to monitor the price action of crude prices to determine if it is wise to be long again in oil.
But one thing worth noticing is that the price of Crude stocks in service and exploration are still mostly over 10% off their May 10th peak. What this tells investors is that Buyers do not believe that the current crude prices are sustainable long enough for oil companies to benefit. In other words, the current spike in crude prices is temporary with a large war premium built in.
Further, the liquidity problem today has dampened speculation capital. Another reason worth noting for the continuous decline in equity prices.
Apple computers has been a favorite short of mine recently. The volume and price action of this stock is not bad for trading. I've been shorting it on and off since it was about $60. It closed at $50.67 this Friday. The problems of Apple are many and beyond the scope of this entry but I'd thought I'd mention what I've been doing in the markets recently.
But one thing worth noticing is that the price of Crude stocks in service and exploration are still mostly over 10% off their May 10th peak. What this tells investors is that Buyers do not believe that the current crude prices are sustainable long enough for oil companies to benefit. In other words, the current spike in crude prices is temporary with a large war premium built in.
Further, the liquidity problem today has dampened speculation capital. Another reason worth noting for the continuous decline in equity prices.
Apple computers has been a favorite short of mine recently. The volume and price action of this stock is not bad for trading. I've been shorting it on and off since it was about $60. It closed at $50.67 this Friday. The problems of Apple are many and beyond the scope of this entry but I'd thought I'd mention what I've been doing in the markets recently.
Tuesday, July 11, 2006
Oil has peaked ....for now
Yes, you read that right. I have been an oil bull for over 2 years but it is my belief that oil has reached a temporary peak. The peak was reached on 7th July 2006 at $75.78 per barrel of light sweet crude. My only reservation to this prediction is if war breaks out somewhere, or there is escalation of troubles in the middle East. Based on fundamentals, oil prices have peaked.
What this means is that prices at the pump will ease.
My prediction is based on a number of indicators:
- Slowing of the US economy. This will affect even China. US spending has fueled much of the growth in the worlds economy in services and products. A large percentage of Chinese growth is in selling products to the US. When the customer reduces buying, the shop surely will feel the pain
- Demand destruction of high oil prices is becoming evident
- Tightening of worldwide monetary policy. Reduced liquidity worldwide will keep speculation money in check
- Technical analysis of crude prices over the last two months with action on Friday 7th July critical
- Marginal increase in Supply due to high prices motivating maximization of old oil wells, Canadian Oil Sand coming online and increased drilling worldwide
The peaking of prices is ofcourse only temporary. It is still my firm belief that we are in a long term commodity bull market for at least the next 10 years. We are only in the early stages but as in all bull markets they are never without temporary set backs.
What this means is that prices at the pump will ease.
My prediction is based on a number of indicators:
- Slowing of the US economy. This will affect even China. US spending has fueled much of the growth in the worlds economy in services and products. A large percentage of Chinese growth is in selling products to the US. When the customer reduces buying, the shop surely will feel the pain
- Demand destruction of high oil prices is becoming evident
- Tightening of worldwide monetary policy. Reduced liquidity worldwide will keep speculation money in check
- Technical analysis of crude prices over the last two months with action on Friday 7th July critical
- Marginal increase in Supply due to high prices motivating maximization of old oil wells, Canadian Oil Sand coming online and increased drilling worldwide
The peaking of prices is ofcourse only temporary. It is still my firm belief that we are in a long term commodity bull market for at least the next 10 years. We are only in the early stages but as in all bull markets they are never without temporary set backs.
Friday, July 07, 2006
Nardelli needs to go
I have never invested in Home Depot but having watched Nardellis' (CEO) interview with Maria on CNBC, my impression of him could not be worse.
His demeanor and avoidance to answering the questions asked was pathetic. What I found most annoying about him was his repeated use of the word 'Again' to precede ever answer as if he was asked to repeat himself.
For a guy from GE trained by Jack Welch, this guy is pathetic. Robbing the companies vaults and mistreating the shareholders.
Nardelli needs to go. The day Nardelli announces his resignation is the day to buy Home Depot.
His demeanor and avoidance to answering the questions asked was pathetic. What I found most annoying about him was his repeated use of the word 'Again' to precede ever answer as if he was asked to repeat himself.
For a guy from GE trained by Jack Welch, this guy is pathetic. Robbing the companies vaults and mistreating the shareholders.
Nardelli needs to go. The day Nardelli announces his resignation is the day to buy Home Depot.
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