The need for oil drilling services will continue even if the price of oil declines, according to Richard Lehmann. Here, in his The ETF Investor, he looks at a favorite way for investors to play this trend.
"Oil prices have a triple or quadruple price boost associated with them. The first is supply/demand dynamics, the second is the weak dollar, the third is speculative fervor and the fourth inflation fears.
"A pundit said that last year it took 65 Euros to buy a barrel of oil and today it still takes 65 Euros to buy a barrel of oil. This illustrates the effect the weak dollar is having on U.S. prices and the international price of oil.
"Inflation protection used to be the province of gold, but now it seems oil is serving a similar function. We think the current oil bubble has not run its course.
"One of our past recommendations, the Oil Service Holders Trust (NYSE: OIH), was first suggested in February 2006 at a price of $101.50. We recommended it again in December 2007 at a price of $179.83.
Solarfun Power (NASDAQ: SOLF) is scheduled to report Q1 EPS on May 21. SOLF over all option implied volatility of 75 is below its 26-week average of 94 according to Track Data, suggesting decreasing price risk.
The market bears are looking for cover and one of their leading superstars, Jim Melcher, who runs the Balestra Capital Partners hedge fund, told The New York Sun today that he believes we are heading for the worst recession since the 1930s and thinks the Dow will fall to between 9,100 and 10,400 - another 20% to 30%.
He told the Sun, "I've never seen the market with more risk and what's significant is that the risk is not yet priced in." He believes an investor's stock portfolio should be half what it is now. He expects unemployment to grow dramatically as consumption slows. And, he things the housing market collapse has a long way to go. He told the Sun that with the "burdens of rising energy and food costs, and combined deterioration of the credit markets" average homeowners will not be able to withstand this recession he sees.
So where's he putting his hedge fund's money? He says it's pretty much devoid of stocks except for two ETFs - the Oil Services Holders Trust (AMEX: OIH) and the StreetTRACKS Gold Trust ETF (NYSE: GLD). The rest of his fund management strategy is shorting stocks and certain bonds - mortgage-backed junk bonds. He's using derivatives, put options and credit default swaps. He is also short ABEX, which is an index of residential mortgage-backed securities.
Another key strategy he is employing is foreign currency trading. His favorite currencies are the Swiss franc and the Japanese yen.
Lita Epstein has written more than 20 books including the "Complete Idiot's Guide to Foreign Currency Trading" and "Trading for Dummies."
Worry about something else other than the chance that the Federal Reserve won't cut its short-term interest rate target. Worry about how little oil is out there to find, how we are running out of cheap natural gas and how China is the linchpin in oil usage, not us.
Those are some of the trepidations that I feel after reading the incredibly good speech by Schlumberger (NYSE: SLB) chief Andrew Gould earlier this month, available on the company's fantastic Web site.
Gould's dealing with the realities of why the Oil Service HOLDRs (AMEX: OIH) won't quit. Easy oil is indeed running out, despite what the bulls tell us. The new additions to old fields give out earlier. The kind of oil and natural gas that is still left to find in North America is low-quality and not deeply reserved. The places where oil can be found are all deepwater or remote.
On today's STOP TRADING! segment on CNBC, Cramer had several key stock picks: Cramer said he loved the Burger King Holdings, Inc. (NYSE: BKC) interview earlier on CNBC because it went from a bad company to a good company. He thinks it can go higher and it may be a multi-year story. On oil services, the Oil Service HOLDRs (AMEX: OIH) is breaking out and Halliburton Co. (NYSE: HAL) is on its way to $40. Cramer said he has a large gainer between here and Friday going into options expirations date: Deere & Co. (NYSE:DE) and The Boeing Co. (NYSE: BA).
I was a little surprised on Burger King because Cramer has not been one of its greater supporters and shares are up more than 100% from the 52-week lows. The Boeing call is actually impossible to argue with, at least today or until long-term projections change. This morning Boeing released its 20-year outlook with a total market opportunity being in the $2.8 trillion range. Halliburton may go there, it may not, but that has been a consistent call and was one of his top 2007 Value Picks for what seems like an eternity ($35.75 today, $29.72 at Jan. 3, 2007). .
With the S&P 500 nearing a new all-time high, technical expert Larry McMillan assesses the road ahead. Here's his technical view, a look at market leadership, and some favored stocks.
"A new all-time closing high for the S&P 500 suggests that the all-time intra-day highs at 1552 are now the next key level within the context of this market cycle. The positive technical pattern of higher-highs and higher lows has continued.
"Therefore, sector leadership remains positive – and this should continue to inspire further gains in the major market indices as long as this trend remains in effect. Meanwhile, market breadth has recovered over the past few trading sessions.
With record high gasoline prices and rising oil, it looks like nothing can stand in the way of Exxon Mobil (NYSE: XOM) lately. The stock has definitely been on fire, and once again today set a new all time high, trading up as high as $84.32 earlier in the session.
I know we are all tired of hearing about the current gasoline prices, but unfortunately there is no way around it... gasoline prices are hot! It was announced today that the national average for a gallon of gasoline rose to $3.196. Not a pretty picture for consumers, but for oil and gas investors things just couldn't get any better.
Gasoline isn't the only thing on the move, oil has been trading higher as well today. Oil is slowly but surely making its charge back up to the $70 level. Today the precious crude has jumped $0.90 to $66.88 and early today hit an intra day high of $67.10.
As we discussed yesterday, the cold wintry weather which has finally taken hold across most of America had oil traders betting on a strong oil market over the upcoming weeks. We have seen oil make a nice bounce from its lows earlier this month when it was trading down around the $50 a barrel mark; yesterday we saw prices trading over $57 for a short period.
Today we get a little snap back into reality with an inventory report that shows oil inventories climbed 2.7 million barrels last week. Analyst's had been expecting to see about a 1.1 million barrel increase and this has put some pressure on the precious crude.
Currently oil has fallen $0.91 to $56.06 but all the major oil stocks are at this point doing alright so far in the today's trading. As of 10:55 this morning:
ExxonMobil Corporation (NYSE: XOM) is trading up 0.2% to $74.52 up $0.13.
Chevron Corporation (NYSE: CVX) is currently trading at 72.92 falling a slight 0.2% down $0.15.
Valero Energy Corp. (NYSE: VLO) is trading at $54.05 gaining 0.4% or $0.21.
BP p.l.s. ADR (NYSE: BP) is getting hit the hardest with the stock falling 0.9% to $63.04 down $0.55.
Oil Service Holders Trust (NYSE: OIH) has put up the best day with a 1.1% rise to $136.89 up $1.51.
Michael Fowlkes has worked as a stock trader for seven years and spent the last two years working as an analyst for the online investment advisory service Investor's Observer.
On tonight's MAD MONEY on CNBC, Cramer discussed oil services and foreign names you can invest in. He's also backing Capital One Financial (NYSE:COF) and Ceradyne Inc. (NASDAQ:CRDN).
His No. 4 favorite pick outside the U.S. is CVRD-Companhia Vale do Rio Doce (RIO-NYSE/ADR). He'll be making more of these predictions this week, but here's what he likes about this one.
Cramer called for a bottom in oil services' stocks. He was positive on Schlumberger Ltd. (NYSE:SLB) and even ticked up the Oil Service HOLDRS (AMEX:OIH). Here is his full note with a large list of oil service tickers that he didn't mention.
He laid the scenario that Capital One earnings weren't the issue and the recent rise is justified after earnings; he even says it could go to $100.00.
Cramer interviewed Joel Moskowitz, CEO of Ceradyne, and basically tries to refute the recent SELL rating from FBR. Cramer is going with the bulls on this one and trusts the company.
Jon Ogg is a partner in 24/7 Wall St., LLC; he does not own securities in the companies he covers.
The market just does not seem to want to believe that OPEC is actually going to be able / willing to follow through on these cuts. Today oil fell to it's lowest level in the last 9 months in a sign that analyst's just do not have faith in the oil cartel's ability to follow through on meaningful production cuts. Many think that since oil is still relatively high the world's largest oil producers will not see the incentive in cutting back their output.
Much of the pessimism ties back to OPEC's history of over producing above it's quotas during time when prices have been high, and even though oil has fallen dramatically since the middle of the summer, we are still looking at pretty pricey oil. No, it's not the $80 a barrel we saw a few months back, but at it's current $56.82 we are still seeing prices that are twice as high as we had 3 years back. Another reason why today's announcement actually backfired against the cartel was the impression that today' move is a signal that global demand has actually fallen enough that these cuts aren't really going to impact the overall price anyway. Many are seeing OPEC's actions as just a big signal that oil has turned bearish for a reason, and nothing is going to change that.
Across the board we saw losses for oil stocks today, but nothing too major:
Sunoco, Inc. (NYSE:SUN): -0.9% to $65.65 down $0.58
Valero Energy Corp. (NYSE:VLO): -1.6% to $52.09 down $0.85
ExxonMobil Corporation (NYSE:XOM): -0.3% to $69.55 down $0.18
Chevron Corporation (NYSE:CVX): -0.5% to $65.28 down $0.36
BP p.l.s. ADR (NYSE:BP): -0.4% to $67.80 down $0.28
Oil Service Holders Trust (OIH): -2.1% to $130.00 down $2.85
ExxonMobil (NYSE: XOM) has become the king of the hill on this year's Fortune Global 500 list. With the run up oil has had over the last couple of years (at least up until the last 3 weeks) it should come as no surprise that this years top 10 consists of 5 oil companies. Last year's top company, Wal-Mart Stores, Inc. (NYSE: WMT) didn't fall very far, and managed to follow XOM in the second place position.
How did ExxonMobil manage to get to the top? Easy... the company posted $339.9 billion in revenues with $36.1 billion in profits. Wal-Mart came in with $315.6 billion in revenues with $11.2 billion profits. A good deal of last year's explosion in oil prices came as a result of damage from hurricane Katrina which crippled much of the Gulf's oil supplies. So far this year we have not been hit with any major hurricanes which has led in a big part to the recent sell off seen in oil.
It was a tough day across the board for oil stocks. Falling oil prices and several industry downgrades pushed stocks down hard in today's trading session.
Oil has been falling sharply over the last month since briefly passing over the $80 barrier during the Lebanese / Hezbollah conflict back in July. Today oil continued its downward spiral and currently the precious crude is trading at $67.50 a barrel. There are a lot of reasons why oil has been on the slide lately, but mainly it comes down to supply and demand. Well lately we have seen that the supply / demand picture is not quite as fragile as analyst's had been thinking. Inventories have actually been on the rise lately but I doubt anyone has been expecting to see crude oil sliding down towards the mid $60's so quickly.
Another key reason as to why oil has been falling has been the lack of any major hurricanes this season. Around the middle of the summer all we were hearing about was how this hurricane season was going to be a tough one, and possibly even worse than what we experienced last summer, and that just hasn't turned out to be the case. Not only have we yet to experience any major storms, weather experts have now reversed their opinions and are calling for a very weak season ahead of us. While that is encouraging news for the country, it has hit oil stocks pretty hard. It wasn't too long ago that most stocks were approaching or setting new highs, and now it feels like the rug has been pulled out from under us.
Solarfun Power
The market bears are looking for cover and one of their leading superstars, Jim Melcher, who runs the Balestra Capital Partners hedge fund, told The New York Sun today that he believes we are heading for the 
With record high gasoline prices and rising oil, it looks like nothing can stand in the way of 
After 
This morning 
ExxonMobil (NYSE: 
It was a tough day across the board for oil stocks. Falling oil prices and several industry downgrades pushed stocks down hard in today's trading session.
Alcoa's Q2 2008 earnings transcript
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Wal-Mart might help your portfolio during the recession
