#1 Think before scratching itch to invest in oil02-25-2011, 04:15 PMThink before scratching itch to invest in oil
By John Waggoner, USA TODAY
Oil prices have been surging. You want to ride the wave, so you're thinking about investing in an exchange traded fund that tracks oil prices.
If you're thinking crude will be a-bubblin' because of events in the Middle East, here's some advice: Go to Las Vegas instead. You'll have lots more fun and may even marry a really fun rodeo clown.
You can make a good argument that worldwide economic gains can, in turn, push oil prices higher. If that's the case, however, you might be better served by considering a broadly based energy fund.
Any investment strategy based on the actions of Libyan strongman Moammar Gadhafi is, well, probably not a sane move. The man blamed the Libyan uprising on young men hopped up on hallucinogenic pills given to them "in their coffee with milk, like Nescafé." Tomorrow he might decide to move to Paris to work on his pancake collection. You just never know with people like this.
True, there is the chance that the uprisings by the people of Libya, Egypt and Tunisia could spread to other countries, such as Saudi Arabia. "That's the sky falling," says Tom Kloza, chief oil analyst for the Oil Price Information Service.
Some of that — about $15 per barrel, Kloza estimates — is already built into the price of oil, which closed at $97.28 a barrel Thursday. Fred Fromm, portfolio manager of Franklin Natural Resources fund, thinks the Libya premium is more like $5 to $10 a barrel, arguing that oil at $80 to $100 was pretty well supported by fundamentals before the Middle East uprisings.
At the moment, however, the loss of Libyan production — about 2% of the world's production — will have its biggest effect on Europe, and particularly, Italy. Libyan oil is light, sweet crude, meaning it has a low sulfur content and is easier to refine than most grades of crude.
02-25-2011, 06:51 PM
- Join Date
- May 2008
Chasing performance in an ETF, mutual fund or a stock is not a good strategy. What goes up usually comes down. Some of us have probably bought a stock that was on fire and then dumped it when it started to go down resulting in a loss. High gas prices will result in politicians, newscasters and the public getting their bowels in an uproar and claiming a double dip recession is coming and the world is going to hell in a hand basket. In a few months, oil will probably be back down to the 80 to 90 dollar range because it is not in the best interest of OPEC to keep oil prices too high.
The author misses the point on how to invest whether it be in oil, gold or cotton. Investing involves a strategy. Picking an asset class like oil and buying stock in equal amounts of stock each and every month is an excellent way to avoid big up and down volatility because of price averaging. Plus, you never lose a penny or make a nickel until you sell.
There are many blue chip companies like Exxon that you can invest directly with them and do not incur brokerage fees. Fill out an application, send them a blank check telling how much a week or month you want drawn from your bank account. You never see the money as it is taken out of your checking account automatically. Even a cave man can do it. :eek::)
02-26-2011, 01:06 AM
- Join Date
- Mar 2010
I invest in everything...energy, mining, basic materials, financial, health care, foreign countries; you name it. But rarely in individual stocks. Sometimes I do, though.
And I place stop loss orders under just about everything so that my losses are not too high. Got sold out of Turkey and Chile recently.
Some of this stuff I've owned for decades; I've got 3M stock I bought back in '82.
How to get burned: Invest in ETFs that claim to invest in "The price" of...... Natural Gas is a good example. They don't really invest directly in natural gas; what they do is continually buy the next month futures contract. It's a bit complicated, but the chance of you making any money are about 0.
I did well by buying XLE, which is a basket of energy companies, and I intend to keep it until it sort of noses over on the chart.
And maybe by that time I'll be making money in health care (XLV)
Last edited by Starbuck; 02-26-2011 at 01:09 AM.
02-26-2011, 01:15 AM
I invest in a broad spectrum of vehicles, including individual stocks I have done due diligence on myself. My average annual return last I looked, factoring in the shit that hit the markets, is about 17%. Research matters.
02-26-2011, 09:54 AM
I have been using IBD's CAN SLIM approach with my "play around" money and have done quite well with it.
It limits losses to 8% and I have had 4 of those compared to 7 winners including Netflix that I got while it was in the $40's Bidu at around $65 the rest have at least returned 75% over about a year and 1/2. A couple of months ago I picked up CTSH and APH and they have returned around 15% so far.I long for the days when our President actually liked our country.
02-26-2011, 01:55 PM
- Join Date
- May 2008
For the past 2 years, my commodity investments have been in gold, silver and palladium which have knocked the socks off of any asset class. Denbury (DNR) is a newly acquired stock that injects CO2 in old wells in MS and LA. Predictions are that only 50% of the oil has been recovered. This company is making money hand over fist.
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