Oil is surging. I sure regret selling my oil stocks.
The current price clearly represents a risk premium associated with the British soldiers being held by Iran. The worst case scenario (or best case from the perspective of investors long oil) is that a war with Iran results in Iran cutting off oil supplies from the Persian Gulf, which would cause an unprecedented spike in oil prices. I’m not the only person who knows about this worst case scenario. It’s factored into the current price.
Holding these sailors hostage is a pretty dumb diplomatic move. If Iran’s goal is to obtain nuclear weapons, Iran ought to be laying low until such weapons are finally ready. Then Iran can act all belligerent and say, “Ha ha, we have nuclear weapons, what are you gong to do about it?”
It also doesn’t make sense to piss off the British. When Argentina pissed them off by taking over the Falkland Islands, they went to war against them.
The most likely resolution is that Iran will give the sailors back, there will be no cutoff of oil, and prices will retreat.
About selling the oil stocks, it's no big deal, it's hard to tell when you have hit the top, the important thing is to get out before it goes back down. I'm glad I didn't have to make that decision, but if I had money in the chinese stocks I would definately get out now. Right now I am invested in internet incubators and telecom, because I thought it was a pretty down market people were very pessemistic about. What do you think? What is the sector that is the most distressed at this time? I have one more purchase to make, I am thinking AMCC probably in july, it historically is a low time of year for the price. Telecom as well is supposed to improve inventory wise soon... so I'm hoping my investments will give some decent returns, I tend to choose companies with a lot of cash on hand, little debt, large market cap, and struggling P/E ratio with a valuation of 1-5$ per share.
Posted by: Brian | May 24, 2007 at 01:45 AM