Oil

[due_indigence]

I'd be intererested to hear banter on what's going to govern crude oil prices in the short-intermediate term: the global re/depression (declining demand) or a weakening USD?

I subscribe to the thesis that too-low prices destroy the industry and add a further drag to future supply so that when the economy does rebound an additional 'sling-shot effect' kicks in. That is, too-low prices (as we've had) ordains even higher future prices, even without the 'bonus' peak oil thesis tossed in for good measure.

It would seem to depend on the severity of the economic fall-off. If industrial production continues its tumble into the oft-cited abyss, can reduced aggregate demand mitigate reduced dollar purchasing power?

[FRED]

Re: Oil

I'd be intererested to hear banter on what's going to govern crude oil prices in the short-intermediate term: the global re/depression (declining demand) or a weakening USD?

I subscribe to the thesis that too-low prices destroy the industry and add a further drag to future supply so that when the economy does rebound an additional 'sling-shot effect' kicks in. That is, too-low prices (as we've had) ordains even higher future prices, even without the 'bonus' peak oil thesis tossed in for good measure.

It would seem to depend on the severity of the economic fall-off. If industrial production continues its tumble into the oft-cited abyss, can reduced aggregate demand mitigate reduced dollar purchasing power?

The iTulip thesis is that oil supply crash meets money supply boom either late 2009 or early 2010 at the latest. Oil and gold will both rise as proxies for future inflation as raw, intermediate, and finished supply declines faster than demand. This topic is thoroughly discussed in Ka-Poom Theory deflation-inflation two-step: Too complex for deflationsts to grasp? - Eric Janszen among other threads over the years.

[karim0028]

Re: Oil

The iTulip thesis is that oil supply crash meets money supply boom either late 2009 or early 2010 at the latest. Oil and gold will both rise as proxies for future inflation as raw, intermediate, and finished supply declines faster than demand. This topic is thoroughly discussed in Ka-Poom Theory deflation-inflation two-step: Too complex for deflationsts to grasp? - Eric Janszen among other threads over the years.

So, then the question i have is what is the most efficient way to buy into oil? Is it futures or oil company stocks? Why is it that i also dont see oil as part of iTulips investment thesis? I saw hold gold and treasuries, does itulip feel its too early to buy into oil at this point in time?

[FRED]

Re: Oil

So, then the question i have is what is the most efficient way to buy into oil? Is it futures or oil company stocks? Why is it that i also dont see oil as part of iTulips investment thesis? I saw hold gold and treasuries, does itulip feel its too early to buy into oil at this point in time?

We're working oil into our thesis now. The trade is out of Treasuries and into oil. The question is timing and, as you say, how to buy oil. Stay tuned!

[LargoWinch]

Re: Oil

We're working oil into our thesis now. The trade is out of Treasuries and into oil. The question is timing and, as you say, how to buy oil. Stay tuned!

We will Ed.; anxiously!


As a personal experience, buying oil can be tricky:

Here is today's data from Kitco. Now notice Crude Oil at just over $US51.

Index data delayed 30 min. DJIA 7,400.80 -85.78 NASDAQ 1,483.48 -7.74 NIKKEI 7,945.96 -26.21 RUSSELL 413.26 -4.37 NYSE 4,937.22 -38.08 TSX 8,722.39 +93.29 USD 83.08 -1.19 Crude Oil 51.06 +2.92 Charts...

Having said that, I bought in December a Crude Oil ETF (2X - $CAD hedged) traded on the Toronto Stock Exchange (TSX): HOU.TO.

At the time, that Crude Oil figure showed $US37.

Now, notice how HOU.TO behaved since then (hint: not so good):


This is due to contango, but maybe something else as well. So, I agree, not only the timing, but the investment vehicle is critical when buying Crude.

One last thing: these ETFs do charge a management fee of 1.15%.

[Jay]

Re: Oil

We're working oil into our thesis now. The trade is out of Treasuries and into oil. The question is timing and, as you say, how to buy oil. Stay tuned!

I can't wait for this one. It makes much sense.

[Mega]

Re: Oil

Fred
I been on this for 2 weeks now, Schiff is very unkeen on Rogers fund, he is far more Canadan engery trusts, like "Penn West"..........May be pipe line companys.........food for thought?

Mike

[leegs]

Re: Oil

I can't wait for this one. It makes much sense.

I can't wait either. I'm 30% in oil ETFs already - OIL, USO, and just this week, UCO. However I confess that I don't really know if these are the best vehicles. I know that there was some discussion here recently of problems with USO.

[loweyecue]

Re: Oil

Is there a ETF that tracks the crude oil index? That is what I would feel comfortable with. I have OIL in my protfolio, lost some money on it, but not selling it any time soon. When the Itulip Gods give the go-ahead I will also add more of the preferred vehicle.

[Sharky]

Re: Oil

I started a thread a while back to discuss good ways to buy oil:

http://www.itulip.com/forums/showthread.php?t=7125

[doom&gloom]

Re: Oil

Fred
I been on this for 2 weeks now, Schiff is very unkeen on Rogers fund, he is far more Canadan engery trusts, like "Penn West"..........May be pipe line companys.........food for thought?

Mike

LOVE LOVE LOVE pipelines. High dividends, lots of good ones.
Though you have to be sure to buy the ones that act more like
tollways than combines tollways and producers.

MMP, EEP, EPD are some of the better ones.

Also, I like LINE a lot. It is not a pipeline, it is an oil producer
100% hedged forward for three years with a high dividend.

[solotar]

Re: Oil

Fred,

Assuming oil gets worked into the picture along with gold, would you expect DBA to go there as well?

[charliebrown]

Re: Oil

Im not an expert by any means but in modern agriculture oil = food.
Natural gas is used to make fertilizer, diesel/gasoline runs the tractors, combines and trucks. Also knowing a farmer he does back up the fact that energy is his biggest cost. Agriculture has additional risks of crop failure due to water, heat/cold etc. So we may see food prices rise faster than oil.

I own DBC dont know if this is the best play or not. It contains 6 commodities heating oil, crude?, corn, wheat, gold and aluminum.
For chartists, and momentum players it looks like we're moving into a period of rising prices for DBC. bottom was hit march 5th. Thanks to uncle ben's QE, DBC has cracked the 50 day MA for the first time since July.

In my trading experiece hope is a bad thing, but ideally DBC could hang out at 20 for a little while to establish a base. Then I will add to my position. After the fed buying euphoria ends and we dont see any inflation, due to short term demand destruction, DBC may go back into the high teens again. So i will keep it on a short leash, meaning that if I see weak price action I may sell, or hedge with some options.

I think i read somewhere that an ETF set up as a trust gets you a little more protection than and ETN. If the sponsor of an ETN blows up, its less clear of your stake in ownership of the assets. I believe that a trust the assets are more separted from the sponsor. In theory I think all that has to be done is to find another sponsor for the assets of the trust??

I pulled up charts of both DBC and DBA and they look to be very correlated. The DBA graph has pretty much the same shape but with slightly less volatility (beta) DBA set its low in December of 2008.

[Chris]

Re: Oil

We're working oil into our thesis now. The trade is out of Treasuries and into oil. The question is timing and, as you say, how to buy oil. Stay tuned!

I love this site! Thanks Ed.

[Digidiver]

Re: Oil

Thanks for that tip. The dividends are incredible.