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You Know You’re an Oil Bull

By Matt Badiali, editor, S&A Resource Report
Friday, October 27, 2006

In your heart, you know you’re an oil bull.
 
I know you are... and it’s not just because you didn’t trade in the Chevy Tahoe for a Honda FIT... or that you haven’t found the time to install those solar panels on the roof.
 
I know you’re an oil bull because the Powershares WilderHill Clean Energy ETF (PBW) tracks the price of oil... and it’s tanking.
 
This fund contains leading alternative energy firms like Evergreen Solar (solar cells), SunPower (solar), and Plug Power (fuel cells). If you and I were truly interested in green energy, those shares would be up big.
 
Instead, as the price of oil falls, investors see green energy as the latest fad and dump the stocks. In fact, I believe the clean energy ETF is a good barometer of the market’s feelings on Peak Oil as well. As you can see from this chart, people just aren’t convinced that green energy is worth a long-term investment:
 
 
Ergo... they believe oil is the long-term answer.
 
Right now, the barometer says people believe light sweet crude will remain the gold standard of energy. Following that line of reasoning, the recent downturn in oil and gas prices is a great investment opportunity...
 
If you believe that, then you need to know this – major oil companies returned between 15% and 20% annually over the last five years.
 
I think there are plenty more gains ahead for the world’s best, blue-chip majors. I’d stick with these giants... they’re the most deserving of your oil investment dollars.
 
As for oil speculations... I recommend finding smaller oil companies with large proven reserves of light sweet crude.
 
As more companies exploit the larger, easier to find tar-sand and sour-crude deposits, those with reserves of light sweet crude will command a premium price.
 
You may lose your shirt in “green” stocks, but if you stick with the majors and uncover a few small gems, there’s still plenty of money to be made in oil.
 
Good investing,
 
Matt Badiali




Recent Articles
Market Notes
Supermajor oil stocks hit new highs... ExxonMobil and Chevron.
 
Telecom continues to boom... Verizon, China Mobile, America Movil all set another new high.
 
The almighty Google nears $500 per share.
 
In the News: Home sales surprise to the upside.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1223.75 +0.1% +10.9%
Oil 37.80 -1.1% +0.8%
Gold 136.50 -1.9% +20.7%
Silver 28.08 -4.9% +57.6%
US-Dollar 79.65 +0.6% +5.2%
Euro 1.33 -0.3% -10.5%
Volatility 17.99 -0.2% -18.6%
Gold Stocks 576.48 -2.5% +25.0%
10-Year Yield 3.16 +7.5% -8.4%

World ETFs
Symbol Price
Change
52-Wk
USA 122.83 +0.1% +10.8%
Canada 30.41 -0.5% +17.1%
Russia 22.00 +0.1% +18.9%
India 38.15 +0.6% +22.5%
Israel 16.92 +1.0% +11.2%
Japan 10.56 -1.2% +6.6%
Singapore 13.66 -0.4% +18.6%
Taiwan 14.87 -0.3% +19.0%
S. Korea 57.35 +0.3% +21.8%
S. Africa 71.15 -1.5% +28.2%
China 43.99 +0.3% -1.5%
Lat.America 52.69 -1.0% +8.5%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 134.90 -2.1% +18.0%
Big Pharma 64.04 +0.1% -2.8%
Internet 72.89 +0.4% +27.4%
Semis 16.25 +0.4% +26.6%
Utilities 30.98 -0.7% +0.2%
Defense 18.55 +0.4% +8.7%
Nanotech 10.16 +0.8% +1.6%
Alt. Energy 10.20 -0.4% -4.6%
Water 18.77 +0.8% +14.5%
Insurance 16.14 +0.4% +19.6%
Biotech 20.65 +0.4% +27.3%
Retail 19.65 +0.3% +27.0%
Software 24.83 +0.7% +24.3%
Big Tech 53.88 +0.1% +22.7%
Construction 13.30 +0.8% +16.2%
Media 13.75 +0.2% +23.7%
Consumer Svcs 67.43 +0.1% +23.1%
Financials 54.95 -0.1% +7.0%
Health Care 63.89 0.0% +1.3%
Industrials 63.79 +0.4% +19.8%
Basic Mat 74.54 -0.1% +27.5%
Real Estate 55.53 +0.3% +24.4%
Transportation 91.65 +0.3% +25.1%
Telecom 22.69 +0.2% +14.6%