OIL

June 15 -- While TSM isn't here to promote trades or even short term predictions. From a purely practical standpoint (much like I stated with gold a few weeks back), I believe that the oil run-up is either done for the time being or, from a conservative standpoint, has been strong enough that its just worth taking profits at this point. To be honest, TSM believes that the commodity run-up was fundamentally based and speculatively exaggerated. Given that, while oil isn't goign to be cheap anytime soon and definitely not in the long-term. It should be poised for a correction (like the overall markets) and profits should be saved now.

May 28 -- Add in to the oil discussion and consideration the fact that OPEC has commented on the very limited and minimal investment being poured into oil production and discovery. What's this mean? If demand continues to ramp up (particularly in other parts of the world, the US isn't decisive here) and OPEC commented that any investment in oil production/discovery isn't logical until oil hits $75, then you get a price spike down the road. Extra demand and limited supply (due to the lack of production and investing in creating later demand) means prices rise. Then the investment $ will flow into producing and discovering more oil, but it'll take time for that investment $ to turn into actual product and greater supply, hence the short term price spike.

I'd also like to mention a couple of other oil plays that my buddy likes: USO is an exchange traded fund (ETF) that is tied to the price and value of oil down in West Texas. DBO is another ETF to play oil by. Third, there is the Schlumberger (SLB) stock. This company is indeed a TSM (taking stock of the markets) fave; although my personal preference is still mixing in the oil play with the emerging markets play through PBR. I just think the upside there greater.

May 26 -- Per a comment in this section and my uncertainty on how to layout my thoughts on the comments, I've added a comment, but for easier viewership am posting the words here too. The comment asked about oil drillers playing into the equation and specifically Transocean (symbol RIG). If you recall, May 22 I mentioned PBR (brazilian energy giant petrobras that partakes in drilling). My words/thoughts are:

I'd say RIG (or DO) is a solid play. Generally speaking, more oil demand in the future and with the currently OPEC production cuts and other unpredictable events (busted pipelines etc), oil drillers such as RIG make sense, along with PBR. I like RIG too because its a large player in the field. They have the majority of drilling rigs worldwide and have a number of 3 and 5 year contracts that will ensure steady revenue streams. They beat earnings estimates recently due to cutting costs and met revenue expectations. Solid stuff considering today's situation and if you believe oil (today and for the past 3 mths) has established lows. Again, a short term dip is very possible, but the worldwide aspect of oil plays makes it strong for long-term growth.

Let me say though that I still like PBR better. First, PBR is more tied to Brazil and, as stated previously, I like Brazil and emerging markets and the BRIC countries (Brazil, Russia, India, China), altho not Russia as much. Moreover, consider that PBR has strong ties with China (they just got a $10 billion loan from China for oil drilling and connections). Third, PBR just discovered what it deems "major" new offshore fields. Fourth, PBR is tied to Brazil and their currency the "real." Remember, the US dollar is weak and that is making oil more expensive to the US. The real is strengthening against the dollar. If you believe that the current US spending is inflationary (even if you say its necessary to stave off catastrophe), then it makes sense that the dollar may or will stay depressed against the real. This means that foreign investors can purchase larger quantities of US dollar denominated commodities when the US dollar is weak. This drives demand up, and helps resource exporting nations such as Brazil. Fifth, commodities are hot and are likely to be a strong sector coming out of this era. GAP and Banana Repulic aren't NEEDS people have. Commodities are. Brazil is rich in them and PBR has strong ties to provide them. Sixth (i think), PBR sounds like Pabst Blue Ribbon, which is classic.

So while I like RIG, I like PBR moreso still. Hope that explains my thoughts on the drillers and those plays in particular! If not, feel free to follow-up with another comment, the blog doesn't get many.

May 22 -- I'm becoming more and more comfortable with the oil play, especially long term. Consider this, oil has built a solid base around $60. It appears that it will dive lower only with a lower DOW/S&P, which is entirely possible in the short term. But thinking long term, Chinese demand grew 4% last month (and that's legit demand growth). Moreover, just because the US doesn't demand as much oil doesn't mean that costs will go down to incentive purchasing. No, it is causing OPEC and others to produce less oil (i.e. SUPPLY is going down). Which means what? Prices will go up as the good becomes more scarce. Add in the 3rd factor, that the US dollar is weak (so therefore the same oil product is going to cost more in US dollars to buy) -- and you have a strong case for oil to go up up and away in the long term.

How do you play/buy oil? Futures markets can be confusing and you're not going to house it in your garage. So try a stock like PBR that is very closely tied to the price of oil.