oil stocks-recession


M

M.Balarama

if there is a recession/depression--How to oil stocks do?
people still have to drive cars etc.
 
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J

John A. Weeks III

M.Balarama said:
if there is a recession/depression--How to oil stocks do?
people still have to drive cars etc.
Hard to tell. With a recession, folks may have less money,
so they may drive less. But then again, the oil companies
might be more profitable at some level of production less
than what they are running at today. Factories normally
have some sweet spot as far as output and profits. If you
run lower than that, or higher than that, your profits may
fall.

-john-
 
E

Elle

This group is about sound financial planning. Diversify.
That means holding some oil stocks but many other
industries' stocks, and for the long run. Then know that
slow and easy wins the race. Remember that the upside of the
recession in the 1970s was that dividends (and dividends did
not take much, if any, of a hit then) were reinvested at
bargain prices, and folks enjoyed exponential growth when
the "recessionary years" ended.

If you're investing for the short run, hold no stocks.

Go to misc.invest.stocks or whatever group for specific
stock recommendations.
 
R

rick++

if there is a recession/depression--How to oil stocks do?
people still have to drive cars etc.
In a worlwide recession the price of commodities falls because
there is less manufacture and transport.
This happened in 1998 when Russia and Asia (save China)
went into recession. Oil fell to $8 in 1999 from around $16.
 
D

dumbstruck

if there is a recession/depression--How to oil stocks do?

Yeah, what port in a storm? Depends what kind of storm... a false
alarm, or a hardcore slowdown that takes fed rates way down, or a
stagflation where the fed has to hold rates up? You could speculate
now, or wait and see, or spread your bets now into generic
diversification. My favorite is a little of each, but mainly catching
onto what proves to work.

Diversification sounds nice, but so many old approaches rise and fall
in lockstep. For instance much of geographical diversity seems to play
follow (or even amplify) the leader. Bond values may go the same or
opposite way as stocks. I used to do great with those diversifiers in
the past, but now it seems harder to find the magic decoupled bullet.
Other ideas?

It may be the "new" thing that isn't yet efficiently priced and
understood. In 2001 era slowdown, you could do pretty good by
selectively choosing hedge-like mutual funds, like buyout/arbitrage or
long/short. Now those types seem wrung out. You could just watch what
is weathering the storm, besides the obvious (overpriced?) things like
oil/gold... I remember doing well with a fund of small cap mortgage
issuers I think (maybe dead now). I only dimly understood they
benefitted by the plunge of fed rates, but certainly could see
results.

So keep your eyes open for the oblique plays, for instance "frontier"
markets. Of course they are chancier than emerging, but look at the
case of non-oil Arab stock exchanges like
http://finance.yahoo.com/q/bc?t=5y&s=^CCSI&l=off&z=m&q=l&c=&c=^DJI
. A tornado of oil money is flowing into their financial and
construction industries. Won't this do better than the obvious and
probably highly priced healthcare or energy? I wish yahoo or someplace
could chart backwards further to show decades of trends. Oil has gone
high, then way low. Japan is spectacularly lower than it was - there's
some decoupling for you.

Oil in particular shouldn't have such great prospects, since almost
infinite tar and shale sources are feasible if barrel prices stay
anywhere high. The Airforce which is one of the biggest US users of
oil is ramping up cheap synthetic jet fuel from coal and gas-wells
that should later be applicable to airlines. Supply is artificially
constrained by the dysfunctional management and backwards technology
of major nationalized oil companies. Consumption is artificially high
in the very emerging countries that are driving up the world cost,
because their gov't hugely subsidizes the local cost of oil so it
isn't rationally used (China, Iran, etc.).
 
P

pallav

One possibility, seeing the run-up to oil, is to invest
in natural gas which is trailing much far behind in prices
compared to oil. If oil stays at current level, natural gas price is
going to increase (to close the gap). If oil comes down,
natural gas price is still going to increase (given
the concern about global warming, it is a cleaner burning fuel, still
need to heat the house, and the fact that it is produced/consumed
locally
rather than being imported like oil).

Oil has had a great run last year and it might or might not
continue to do well. Natural gas might have a great
run this year or in the coming years. I own a mutual fund in natural
gas.

Also one poster above mentioned the profits from
Middle-eastern nations being dumped back into financials/service
industry in the 'frontier' markets. If you want to tap into that
consider something like TRAMX - T Rowe Price Africa and Middle
East Fund which started last year and has done great so far.
I don't own any of it.
 
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A

Andrew Koenig

Remember that the upside of the recession in the 1970s was that dividends
(and dividends did not take much, if any, of a hit then) were reinvested
at bargain prices, and folks enjoyed exponential growth when the
"recessionary years" ended.
Also, you might want to look for an article on vanguard.com dated January 10
called "Recession and the Stock Market: Timing is Everything," which notes
that the S&P 500 posted positive returns during five out of the last nine
recessions.
 
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E

Elle

Andrew Koenig said:
you might want to look for an article on vanguard.com
dated January 10 called "Recession and the Stock Market:
Timing is Everything," which notes that the S&P 500 posted
positive returns during five out of the last nine
recessions.
Nice article, found quickly by typing "recession" into the
Vanguard site's search engine. I too have been watching for
articles that discuss historical recessions. This is a nice
summary of the nine said to have occurred since 1953.

Given that four of the recessions posted negative S&P 500
returns, I continue to value the advice to keep reinvesting
dividends, so as to pick up stocks at bargain prices.

One caveat to me remains that major banks are in
"significant" trouble. "Significant" being debatable. I am
responding largely to the dividend cuts (and other actions
taken) at Citi and WaMu. This is the first time in at least
18 years since either failed to raise its dividend at least
annually, if yahoo's records are reliable. I do not know how
much to read into this. Either way, being a long term
investor, the rules are to stay cool; maybe sell off any
positions seeming to be wildly overpriced and buy other
stocks cheap; take long term capital losses and buy back
later; and reinvest dividends where one can.
 

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