It's the speculators!!! (yup, oil again)

jgmacg · Jul 3, 2008

No mockery here, my friend, honest.

Just the morning comedy of a poor, shortsighted man with no understanding of money, numbers or finance; a 15-year-old Toyota pickup truck; and a $200 trip to the in-laws bearing down on him.

I do like them bulk hot dogs, though.

Captain_Kirk · Jul 3, 2008

Good luck, ragu--hope you make a killing.

I just couldn't pull the trigger on something like this now--I'd be too concerned I missed the party and I'd be jumping in right at the crest, and then do nothing but take the painful ride down. I don't doubt the price of oil may continue to rise, but after a run up of what, $70 a barrel in about half a year, it would seem the potential's there for a reversal as well. Especially as people really start to address their driving habits (and there is some evidence of that--average miles driven metric is going down in the US).

Same with going short on the Dow. It's dropped almost 2K in six weeks. The near term opportunity to go short on the Dow may be in the rear view mirror. At some point, it's going to get some of that loss back, and if it's soon and you're shorting it, ouch.

Just one man's take. But, be glad I'm not jumping into USO. Because that would be the spitfire guarantee that the price of oil would start plummeting....

Grimace · Jul 3, 2008

The Big Ragu said:

http://ap.google.com/article/ALeqM5i5TtajgUpSm7KY5jf-lCJGHBB-tAD91MAM4O3

$146 a barrel and climbing... The cost of a barrel of Brent crude up $4 since the beginning of the week.

In the mean time, we officially entered a bear market yesterday. The Dow Jones is down 21 percent since last October. June was the 37th worst month for the stock market in 80 years. The FTSE (London) passed the 20 percent bear market threshold already. Anyone who has their money sitting mindlessly in equities right now is insane.

If you have clicked any of these threads the last year and a half, you know what I was saying about the economy as a whole, the stagflation an oil shock was going to bring and what was going to happen to the price of oil (based on supply and demand, not the "speculator" nonsense I kept responding to on here).

Last of these threads, I believe I said $150 a barrel soon (when we were in the 130s) and $200 within 15 months (probably much sooner). This is happening quickly. There is just not enough of the stuff, reserves are falling, and the price is going to keep rising. These world politicians bitching about it are powerless to do anything about it, and in fact, many countries with the highest demand are making things worse by stockpiling and subsidizing it (which boosts demand and makes the worldwide price rise even more).

I have never done this on here, but I'll flat out make the recommendation (but won't take responsibility for whatever happens to anyone's money). I won't recommend people on here try playing with commodities if it is something they don't understand, but if you have ANY money to invest, buy just a little of the U.S. Oil Fund. It's an exchange-traded fund that mirrors the price of West Texas crude and trades under the stock symbol USO. It trades like a stock, so you can buy it through your discount brokerage account, if you have one. It's the easiest way to play the commodity. It has an expense ratio of .5 percent, which is annoying, but it's worth it. As long as the price of oil rises -- and it is going to -- the price of USO will rise in lock step. The fund is up about 100 percent in the last year, and 10 to 15 percent in the last month. There are no guarantees, but I'd bet my farm (and pretty much have) that this is not done yet. The price of oil is not even close to where it is ultimately going. If I am right, as the economy goes into reverse and worldwide equities are going to be in the crapper for a while, you can actually make some money *gasp* -- just WATCH it and put in a good-till-canceled limit sell order (maybe around $110 or $112 a share if USO is your weapon of choice) so you get out if the price starts to drop quickly. I don't want anyone losing a ton of money on my stupid advice. But if you do it, and you make the money I am positive you are going to make over the next year, while everyone else is suffering and watching their savings dissappear (and everyone with their money parked in an S&P 500 mutual fund is going to be bitching on threads on here for the next 2 to 3 years; get ready for that trend), please just buy me a drink, OK?
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Just wait 'til we start drilling in ANWR and off the coasts, smart guy. The price of oil will plummet (I'm guessing by Labor Day) and you'll be left holding worthless stocks. Ha ha!

PeteyPirate · Jul 3, 2008

jgmacg said:

My short term oil-investment strategy includes the immediate purchase of the most liquid and volatile version of that commodity. Later today, I will remonetize part of the family portfolio by moving us out of our unprofitable longterm holdings in hard US currency. These holdings - backed by bonds held by the Chinese and as of today worth far less on the global exchange than they were several short years ago - will be traded instead for a 23-gallon position in the retail gasoline market. We plan to pinpoint the 87-octane (with a 10% ethanol additive component) sector in that market.

By late this evening, I will have painstakingly converted that short-term investment into nearly 6 hours of northward highway travel. For 48 hours thereafter, my investment partner and I will stand pat, watching fireworks, while we wait for the global commodities market to readjust.

Then, Sunday morning, we will eliminate the very last of our sluggish cash holdings to take another 6-hour position in the retail market. Thus, by Sunday night, returning home from our holiday weekend, we will have gone long in the market for a rough total of 46 gallons, at the rate of approximately $4.30 per gallon (unless we stop in Jersey), for a ballpark expenditure of $200.

Our rate of return on that investment - to be measured using the comparative index of Costco hotdogs, gray market M-80s, and slices of summer melon - will be discussed on Monday.
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You wouldn't last two seconds with Cramer.

Football_Bat · Jul 3, 2008

The Big Ragu said:

(O)il is going to hit at least $200 a barrel by the end of next year, if not much sooner.

But if I am wrong, at least you can come back here early next year and say, "I told you so."
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We'll check back then and see if Old Tony's petroleum enemas are cheaper or more expensive.

poindexter · Jul 3, 2008

jgmacg said:

My short term oil-investment strategy includes the immediate purchase of the most liquid and volatile version of that commodity. Later today, I will remonetize part of the family portfolio by moving us out of our unprofitable longterm holdings in hard US currency. These holdings - backed by bonds held by the Chinese and as of today worth far less on the global exchange than they were several short years ago - will be traded instead for a 23-gallon position in the retail gasoline market. We plan to pinpoint the 87-octane (with a 10% ethanol additive component) sector in that market.

By late this evening, I will have painstakingly converted that short-term investment into nearly 6 hours of northward highway travel. For 48 hours thereafter, my investment partner and I will stand pat, watching fireworks, while we wait for the global commodities market to readjust.

Then, Sunday morning, we will eliminate the very last of our sluggish cash holdings to take another 6-hour position in the retail market. Thus, by Sunday night, returning home from our holiday weekend, we will have gone long in the market for a rough total of 46 gallons, at the rate of approximately $4.30 per gallon (unless we stop in Jersey), for a ballpark expenditure of $200.

Our rate of return on that investment - to be measured using the comparative index of Costco hotdogs, gray market M-80s, and slices of summer melon - will be discussed on Monday.
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I liked that.

andyouare? · Jul 3, 2008

The Big Ragu said:

http://ap.google.com/article/ALeqM5i5TtajgUpSm7KY5jf-lCJGHBB-tAD91MAM4O3

$146 a barrel and climbing... The cost of a barrel of Brent crude up $4 since the beginning of the week.

In the mean time, we officially entered a bear market yesterday. The Dow Jones is down 21 percent since last October. June was the 37th worst month for the stock market in 80 years. The FTSE (London) passed the 20 percent bear market threshold already. Anyone who has their money sitting mindlessly in equities right now is insane.
. . .
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Interesting ideas, but I'm sticking with my lotto tickets portfolio. You can' win if you don't play!

poindexter · Jul 3, 2008

The Big Ragu said:

The ETF shorts are smart, but riskier to me. Shorting financials, in particular, could mean bucket loads of money, but a lot of bad news has already been built into those stocks, so the worst may be over and they may just stay in a depressed range now. For example, the shit is hitting the fan with UBS right now and the time to be shorting was two months ago, not today, probably.
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I don't believe for a second that "all the bad news has already been built into" financial stocks. If you believe that, you don't follow it close enough, IMO.

The Big Ragu · Jul 3, 2008

poindexter said:

The Big Ragu said:

The ETF shorts are smart, but riskier to me. Shorting financials, in particular, could mean bucket loads of money, but a lot of bad news has already been built into those stocks, so the worst may be over and they may just stay in a depressed range now. For example, the shit is hitting the fan with UBS right now and the time to be shorting was two months ago, not today, probably.
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I don't believe for a second that "all the bad news has already been built into" financial stocks. If you believe that, you don't follow it close enough, IMO.
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Well... You're right. I don't follow them very closely. I won't touch things that are that cyclical in the best of times, so I virtually ignore then.

I didn't say ALL the bad news is built in. I said a lot is. I'd worry that we have seen the worst of it, and also when you are shorting an asset you are limited by the fact that it can only drop in value to the point of worthlessness and some of these companies are fairly close to that point, so the downside gain is limited. But you are correct. I don't follow those stocks very closely. I've never seen anyone consistently win playing around with equities in the financial sector, so I concentrate my energies elsewhere.

ScribePharisee · Jul 3, 2008

What if a good chunk of your 401K is in European markets? Better or worse?

The Big Ragu · Jul 3, 2008

If you are talking about equities, the same factors hammering the U.S. stock markets are hammering the rest of the world. Of course there are always opportunities in the stock market, but stocks as a whole are getting hit hard. Most of Europe, in particular, is so similar to the U.S. economically, that in this global economy, there is no difference between a U.S. stock and a similar European stock. Whether you own Citicorp or UBS right now, for example, you are getting hammered. Same with British Airways or American Airlines. Or Daimler AG or Ford Motor Company. European equities aren't a way to diversify. They are the same exact thing.

Football_Bat · Jul 3, 2008

ScribePharisee said:

What if a good chunk of your 401K is in European markets? Better or worse?
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For now ... if if you paid in on a high dollar ... WAY better. Duh!

You'd have to be a really lucky old retiring bastard who passed on the newspaper / automotive portfolio to cash in, however.

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