Gyroscopic Investing

Anyone out there eyeballing oil stocks at current levels? My wife who is never interested in anything to do with investing says that she wants to buy some. Those dividends look tasty but I realize they are not guaranteed. This stuff (oil, that is) is in limited supply in the long run, right?

interesting documentary on oil and what will happen when/if we run out.

trailer
https://www.youtube.com/watch?v=WAyHIOg5aHk

complete movie
https://www.youtube.com/watch?v=IVd-zAXACrU

can't comment on your question.

Oil stocks is only for dividend investors. Don't try to time on the stock price.
It will be dead business at some time, 10 - 30 years. So in the meantime you just collect your dividend.
It's about 4 %. No guarantee, but quite stable. So better than Bonds at the moment.
There are the big 5. If your are US citzen, choose Chevron or Exon.

I'm overweighted in oil stocks because I started out as a dividend investor. Love my Chevron. I bought in 2004-5 and it recently doubled. Of course, now it's down to 85%, but the dividend yield on the original investment is 6.5% and growing. Also have PSX/Philips 66 which spun off from COP (Conoco hasn't been so hot for several years), and XOM/Exxon.

I bought BP during the disaster and public relations downward spiral. Was doing pretty well until oil went down across the board.

I'm in a low enough tax bracket that I don't pay any tax on these dividends, so I'll continue to collect for now, but I really should get rid of some of this oil when the price comes back and put it into the pp or at least a broad index of stocks.

I'd give it a few more months before buying; it could get a bit uglier.  Keep an eye on the service companies as well.

dualstow wrote: I bought BP during the disaster and public relations downward spiral. Was doing pretty well until oil went down across the board.

Ah ha! Buy the spills!

If you look at the 35 year chart for Exxon, it appears to be at its moving average. Probably a good place to buy, or near it. Jim Rickards says that $60 oil is the floor, btw, which we are at. I would wait for it to stop moving down before pulling the trigger, though.

I guess the danger with resource stocks is that the companies choose to squander all of the revenue stream on an exorbitant forlorn search for reserves that simply aren't out there. I wonder whether the ideal oil stock to own would be a company that viewed itself a bit like an amortizing bond. It would just sit on its existing low cost reserves and run them dry and not waste a penny looking for more. I think there is a bit of an agency problem at the heart of this. The management typically want growth and expansion even if the shareholders just want to make the most of their money. Tax incentives and such like also induce wasteful spending on fruitless exploration.
http://www.gmo.com/websitecontent/GMO_Q ... 4_full.pdf

Because fracking reserves basically run off in two years and can be exploited very quickly indeed by the
enterprising U.S. industry, such reserves could be viewed as much closer to oil storage reserves than a good,
traditional field that flows for 30 to 60 years. Fracking oil reserves could consequently be treated as our
emergency reserve. In real life we are using it up as fast as we can. Let us hope that there will not come a time
in 10 to 20 years when we will regret the absence of reserves that could be developed in a hurry. Meanwhile,
cheap traditional oil, in contrast, becomes increasingly difficult to find both in the U.S. and globally. Last year
for example, despite spending nearly $700 billion globally – up from $250 billion in 2005 – the oil industry
found just 4½ months’ worth of current oil production levels, a 50-year low!

RyeWhiskey wrote: I think there's two ways to approach the oil situation:
1) Look to enter into well diversified companies for the long-run. Dividend investing.
2) Look to pick up drillers at a potential bottom and cash out after a significant rebound.

For the former, Chevron, Exxon, Phillips are all good choices. For the later I'd look at North Atlantic Drilling and Seadrill although almost all the drillers have been destroyed in the past month.

The drillers are really a gambling choise. I prefer a more allround service provider like Slumberger.

barrett wrote: Anyone out there eyeballing oil stocks at current levels? My wife who is never interested in anything to do with investing says that she wants to buy some. Those dividends look tasty but I realize they are not guaranteed. This stuff (oil, that is) is in limited supply in the long run, right?

The have yet to mark their proven reserves to the new lower price of oil.  So theres a lot more downside to come as $90 was the point where proven reserves were economical.  Wait until you see bankruptcies.

Guess what happens when proven reserves are no longer economical?  They're no longer proven reserves.  It's a legal accounting fiction requirement by the SEC.  This is why equity is a leveraged play on the commodity, i.e. as the commodity rises in price more and more unproven & probable reserves are reassigned to the proven reserves category and vice versa.  This can take years since the legal requirement is to use the 12-month moving average of the commodity price, not mark to market.

The safest way to make money in this industry is the pipeline operators.  They are the toll roads.  But that's not really a speculation on the underlying commodity.

I heard commodities pundit Dennis Gartman say he thought that oil would drop into the 30's before it stops. That's another 30+%.

Reub wrote: I heard commodities pundit Dennis Gartman say he thought that oil would drop into the 30's before it stops. That's another 30+%.

What is his track record?  He may be a dayum old dean, but what I care about is performance.

MachineGhost wrote:

Reub wrote: I heard commodities pundit Dennis Gartman say he thought that oil would drop into the 30's before it stops. That's another 30+%.

What is his track record?  He may be a dayum old dean, but what I care about is performance.

To quote the answer to the joke "What do you call a deer with no eyes?"... I have no eye deer.