i’m a pretty idiot/noob investor. not trying to get a home run just trying to help the 401k. with the big drop in oil is there anything that might be a good value right now? long term is just fine.
Buy a few tankers full of gas and sit on it till it goes back up to 4$. BOOM! You just nearly doubled your investment. Good luck getting that kind of return on the market.
already bought a tanker from some dude online from africa who needed to unload it quickly. just wired some cash to him, waiting for my title. i’m gonna score huge on this deal!
Road trip!
I personally think we’re at a very interesting point in the market. We could gallop back up above 100 or hit 30 with relatively equal probability. China is slowing as is Europe (and we never really recovered) throw in the fact NA is producing a ton and will continue to do so at a loss to keep infrastructure running and certain OPEC members want to kill NA production all leading to cheaper oil. (Which would ultimately probably be good for our economy). However with the nonsense with ISIS hanging around a major oil producing area and Russia, Iran, Venezuela needing high oil to pay for basic infrastructure and services (and others needing cash to provide bread circuses so people ignore the government) there might be a severe tightening to boost prices (which won’t help in the long term without sustained demand because the net money received would be the same or lower). If I had to wager I think we move lower in oil from here QED at least over the next few months, but it’s dicey enough and I’m not expert enough to put my money where my mouth is.
i expect it to go lower…a little. don’t care necessarily about that i’m more interested in the rebound i think will take place. key word, think.
I personally think we’re at a very interesting point in the market. We could gallop back up above 100 or hit 30 with relatively equal probability.
The probability of oil hitting $30 or even $40 is zero.
$55 is probably a floor price and only for short term. 10% drops in a day are not “real” beyond what the price is going to be over the next 1-2 weeks.
I will admit I was a little shocked at the price drop today, but that was a reaction to Saudi guidance on production.
If prices were to even stay this low ($65) for a couple of months, this will have major implications for production
cuts 6-12 months out as investment is going to plummet. At this price level, Canadian oil sands production is basically at break even, maybe even a loss.
At these oil prices, Keystone XL starts to look really stupid economically when you consider it is all for oil sand production, so maybe this is just a conspiracy by the Democrats;)
If you have cash to cover, what you might consider is selling out of the money puts, 1-3 months out. You get the premium up
front, worst case is you end up having to buy the stocks at a little less than they are trading at today (when you
consider the option premium), more likely scenario is the stocks rebound and maybe you just keep the whole premium.
I would look at doing this for blue chip type mid to major producers with good divis. The options premiums look
attractive based on today’s close, but I would expect next week to be very volatile.
Other oil play is to look at gold stocks. They have gotten pummeled, but assuming oil prices stay lower that will
help their production costs and the POG is close to a bottom. I say that because even the best miners are looking
at $800-$900 per ounce production costs and many mines have costs closer to $1000 or more. The cost of production
sets a natural floor. Gold prices have also been hurt by the market absorbing bullion being sold out of the GLD etf.
The price rise followed the buildup of assets in this fund, the decline is following the price down. GLD is very liquid
and for “traders”, the marked absorbing the bullion are people that want to keep it. Once this float is sold down,
that will leverage gold prices up as the supply will be solely production driven. Switzerland is going to vote on
Sunday at going back on the gold standard. Based on these considerations
there really isn’t room for long term prices to do down any lower. We could see another 10% drop (shorter term), but
longer term it is a great time to get in.
I would suggest deciding how much you want to roll the dice with and invest half of it now and save the other half in case
of a further drop. As long as you have at least a 6-12 month timeline and stick to blue chip type stocks in oil and gold
it seems like it would be hard to lose money at this point.
Disclaimer: I am overweight in both oil and gold and have taken a beating over the last 4 months. I did not foresee oil
or gold going this low. I have added a small amount to my positions, but since I am already overweight (and have a poor
track record) I am not going all in for more (but I am not selling anything). However, if you have been
standing on the sidelines and are not overweight in these sectors this seems like a very good buying opportunity as long as you
can hang in for the volatility over the next 6-12 months.
I personally think we’re at a very interesting point in the market. We could gallop back up above 100 or hit 30 with relatively equal probability.
The probability of oil hitting $30 or even $40 is zero.
$55 is probably a floor price and only for short term. 10% drops in a day are not “real” beyond what the price is going to be over the next 1-2 weeks.
I will admit I was a little shocked at the price drop today, but that was a reaction to Saudi guidance on production.
If prices were to even stay this low ($65) for a couple of months, this will have major implications for production
cuts 6-12 months out as investment is going to plummet. At this price level, Canadian oil sands production is basically at break even, maybe even a loss.
At these oil prices, Keystone XL starts to look really stupid economically when you consider it is all for oil sand production, so maybe this is just a conspiracy by the Democrats;)
If you have cash to cover, what you might consider is selling out of the money puts, 1-3 months out. You get the premium up
front, worst case is you end up having to buy the stocks at a little less than they are trading at today (when you
consider the option premium), more likely scenario is the stocks rebound and maybe you just keep the whole premium.
I would look at doing this for blue chip type mid to major producers with good divis. The options premiums look
attractive based on today’s close, but I would expect next week to be very volatile.
Other oil play is to look at gold stocks. They have gotten pummeled, but assuming oil prices stay lower that will
help their production costs and the POG is close to a bottom. I say that because even the best miners are looking
at $800-$900 per ounce production costs and many mines have costs closer to $1000 or more. The cost of production
sets a natural floor. Gold prices have also been hurt by the market absorbing bullion being sold out of the GLD etf.
The price rise followed the buildup of assets in this fund, the decline is following the price down. GLD is very liquid
and for “traders”, the marked absorbing the bullion are people that want to keep it. Once this float is sold down,
that will leverage gold prices up as the supply will be solely production driven. Switzerland is going to vote on
Sunday at going back on the gold standard. Based on these considerations
there really isn’t room for long term prices to do down any lower. We could see another 10% drop (shorter term), but
longer term it is a great time to get in.
I would suggest deciding how much you want to roll the dice with and invest half of it now and save the other half in case
of a further drop. As long as you have at least a 6-12 month timeline and stick to blue chip type stocks in oil and gold
it seems like it would be hard to lose money at this point.
Disclaimer: I am overweight in both oil and gold and have taken a beating over the last 4 months. I did not foresee oil
or gold going this low. I have added a small amount to my positions, but since I am already overweight (and have a poor
track record) I am not going all in for more (but I am not selling anything). However, if you have been
standing on the sidelines and are not overweight in these sectors this seems like a very good buying opportunity as long as you
can hang in for the volatility over the next 6-12 months.
A few points:
The OP said he’s a noob investor so I would strongly recommend against selling out of the money puts.
I’ll buy your one touch 55 option if it’s Feb expiration. You realize that’s only 10 buck, commodities are trend following, and economic indicators aren’t that strong for oil? I could see us stabilizing here but if we drift over the next three months it will be lower, unless China all of a sudden ramps up their economy a bit.
Stay from the oil play at this point, i have been killing it on retail stocks. All that extra money has to go somewhere, and it doesn’t seem to be going into the bank. People are going to buy more Xmas stuff with all that extra dough, and the retail stocks are going to kill earning next quarter. Many are already running up. I have said it here before, but Deckers is a great play still. I have almost doubled in just a little over a year, and this polar vortex shit just adds to their bottom line. With all that extra cash and the cold most the country got into early, UGG boots should be flying off the shelves. And when it gets warm, they go out and buy sandals and HOKA’s!!! Cant lose……
Forget about it. Seriously.
If you are a beginner investor you have absolutely no reason to try to play a specific commodity. There are so many ways to go wrong with moves like that.
Follow the well-accepted advice. Buy a few diversified, low-cost mutual funds. After about 20-30 years of sensible investing, if you have a few bucks to spare and want to have fun gambling on a commodity, go for it. Until then, banish the thought.
That said, if you just are absolutely certain that oil prices are going to go up and can’t stand the thought of missing out on the rally, then at least buy a fund that has positions in quite a few oil stocks, rather than trying to play games on a commodity exchange. Look at something like this. But, before you do, re-read paragraph #2.
https://www.spdrs.com/product/fund.seam?ticker=XES
A few points:
The OP said he’s a noob investor so I would strongly recommend against selling out of the money puts.
I’ll buy your one touch 55 option if it’s Feb expiration. You realize that’s only 10 buck, commodities are trend following, and economic indicators aren’t that strong for oil? I could see us stabilizing here but if we drift over the next three months it will be lower, unless China all of a sudden ramps up their economy a bit.
As I understand it, the investment cycle for fracking is much shorter, much more continuously capital intensive to maintain production rates.
Weakness like we have seen is going to cause capital investment to plummet, which in turn will lead to production cuts.
There used to be a lot more momentum with respect to production for a given investment, so production was much slower to ramp down. For
these reasons it seems hard to see a basis for any further drops, especially when there is so much more production (like oil sands) on the margins
that loses money (rather than just has a lower margin) when prices take a hit. One of the reasons that oil production has gone up so much is that
it has been so cheap to borrow money, a lot of bad investments were made and now we are seeing the consequences. Spending lots of money
to bring on marginal production that has high costs is now going to cause a lot of pain for some companies. Good thing for them they at least
did not pay a whole lot to borrow to make their bad investments. The Saudis are probably letting production ride to shake out some of these weak hands
and force others to make production cuts. Either that or behind the scenes pressure to punish Russia who desperately needs oil money and is
really getting hurt by the low prices.
I don’t think we need any demand growth to bring prices back up. Production is just going to drop to meet the demand that exists and that will
buoy prices. There is going to be a lot of volatility over the next 3-6 months while we reach a new equilibrium. The Fed is a bit of a wildcard, if they raised
rates I think it would lead to further production cuts as the cost of capital investments would go up.
As far as out of the money puts for a noob investor, it really isn’t that complicated. If you decide you want to buy a stock, selling out of the money puts is
a way of doing it that limits your risk and guarantees you get it for a low price if at all. The worse thing that happens is you end up buying a stock that you wanted to buy anyway. I see it as “hedging”
versus “speculating”. If you didn’t want to actually own the stock, then I agree this is probably inappropriate for a noob. I think options get a bad name
because of a lot of complicated and risky strategies they are employed in. If you stick to simple strategies that you fully understand and use them with
stocks that you want to own as an investment they should be in the quiver of any investor.
As I understand it, the investment cycle for fracking is much shorter, much more continuously capital intensive to maintain production rates.
Weakness like we have seen is going to cause capital investment to plummet, which in turn will lead to production cuts.
Correct. It’s common to see decline rates of 70-90% in the first 18months of production.
One of the reasons that oil production has gone up so much is that it has been so cheap to borrow money, a lot of bad investments were made and now we are seeing the consequences.
Correct again. I’m hearing a lot of different numbers on what the bad debt could be but it’s in the range of $50-250billion. No clue what creditors will be able to recoup from that.
The Saudis are probably letting production ride to shake out some of these weak hands and force others to make production cuts. Either that or behind the scenes pressure to punish Russia who desperately needs oil money and is really getting hurt by the low prices.
Both are plausible. Lot’s of interesting geopolitical implications.
I don’t think we need any demand growth to bring prices back up. Production is just going to drop to meet the demand that exists and that will buoy prices. There is going to be a lot of volatility over the next 3-6 months while we reach a new equilibrium. The Fed is a bit of a wildcard, if they raised rates I think it would lead to further production cuts as the cost of capital investments would go up.
FWIW, the new tightening is allowing assets to run off their balance sheet. The new easing is asset purchases. There’s a chance they’ll raise short term rates “just to see what happens” but there’s nothing that calls for it at the moment. IMO interest rates are far too blunt an instrument to deal with bad loans/lending practices. It’s like aggresive chemo: it kills the cancer but also kills the patient.
Airlines or cruise ships. All were up 4% or more on Friday after the news came out that opec would not cut production.
Also, you could sell short the oil services companies HAL, RIG. But since you said your a noob, that’s a little more risky, so you should avoid that strategy, but it’s an option.
The Saudis are probably letting production ride to shake out some of these weak hands
and force others to make production cuts.
Everyone’s forgetting to mention the simply, easy answer. The dollar has pretty much skyrocketed in value since about July. U.S. dollar index was ~80 in July, and is ~88 now. That’s going to directly correlate to lower cost of imported oil. And despite all the hoopla, we still import a lot.
- Invest in transportation / energy intensive businesses. Airlines might do well or shipping.
- Invest in oil. Buy low, sell high. Its cheap now - it won’t be forever.
- Buy a big ass V12 Hummer
Start a company offering job placement services to oil professionals who have lost their jobs. /notpink
Stock prices for many oil companies are down; XOM, CVX, BP, RDS, etc… If you’re looking long term, I would pick up as much of those companies as your comfortable doing. The larger companies are better able to ride out dry patches and this is your opportunity to pick up shares at a discount.
what boiler room shop do you work for?
and being married to a losing trade for four months is really not the best strategy fwiw…
There are a lot of bad ideas in this thread. Dude’s not trying to be a commodities speculator, he’s a self described “idiot/noob investor”.
There is but one real answer to the OP’s actual question. Cheaper oil = cheaper everything. Take all the money you’re saving due to cheaper gas, food, etc. and don’t spend it on additional bullshit. Pay down high interest debt if you have any, contribute as much as you can to every tax advantaged retirement account for which you are eligible, invest in low cost index funds and tune out the rest of this noise.
Pay down high interest debt if you have any, contribute as much as you can to every tax advantaged retirement account for which you are eligible, invest in low cost index funds and tune out the rest of this noise. //
Great advice for any noob, but i hear this low cost index fund thing a lot, and for the life of me do not understand why people would not just but the tracking stock. I see funds offer the S&P fund with their corresponding fees, but why not just buy the SPY stock for your $7 dollar discount fee with an online broker and be done with all the fees? And many funds have tracking stocks like this, QQQ is another big one for playing the Nasdaq 100 i believe. Just pay the trade fee and you are done, or am i missing something here??