Monday, November 23, 2015

I Love You If You Are Ugly

It was just only in the beginning of the year where every move happening to Oil and proxy companies here were all the rage. Did I miss out a memo that this is no longer interesting to anybody? Or perhaps the news that oil is back under $40 is no longer relevant to anybody?

As far as I know, without looking at charts or anything and just talking to people I know, the O&G industry is already doing bad, with my "insiders" expecting it to get worse. Of course, one important point to note is that the stock market is forward looking, meaning that it gives higher weightage to the current situation and extrapolates from there. Which means, the "badness" could already be priced in.

Nostramoney predicted in March that if 3 key factors aligned like stars in the sky, we would be heading for a bottom in Oil in the future. However, since then the main culprit for a lack of a clear bottom is actual one of the most crucial ones - a top in the USD. That just hasn't happened yet. The USD-Oil relationship is a lot stronger than what most people think.


1984 is the only useful historically similar comparison to the USD (based on charts, not fundamental backdrops). The massive strengthening in 1984 would have already lost it's steam and lost almost all of its gains by now if this was then. As spectacular a rise that it was, it was also a spectacular drop.

The USD has managed to chop around for the past few months at this relatively elevated upper range and I personally do not believe that we break away from all previous historical comparisons (like rolling 1 year performance) and create a "new normal". In fact, I believe that if the USD continues to go higher (which apparently, almost every single economist / bank analyst in the world believes *cough career risk cough*), it would in fact give it a lot more room to fall. And back we go to our USD-Oil relationship. If the USD falls, Oil would rise.

(Which, coincidentally would also be pretty perfect for all my other commodity investments, ie Gold and Silver)

If we turn to the charts and look at both the Corps - Keppel and Semb - you can see that they are both hovering around the 40% drawdown mark. I talked about my interest in them in July this year, and viola, what do you know, my recent average price of my holdings of them is roughly at that price, which is about 30% off its highs.

Crude oil is back under $40 again. The current low is about $37.80 in end August, which is pretty... low in my opinion. Of course my opinion means jack shit, cos umm yeah, I'm 25. My frame of reference is like $100 oil, so obviously this is relatively lower. Anchoring is a dangerous bias, I know I know. But what can I do about it?

If oil holds its August lows AND the USD finally starts facing reality and comes off, to me that's a sign that the bottom is already in and all-systems are a go. I would be adding in new capital to beef up my Keppel and SembCorp positions. That also means that I totally called the bottom in my 7th Aug post and I should be conferred the "Guru" title.

Actually, this really doesn't mean anything because if Oil breaks its lows, the USD head higher and the stock prices drop, I would STILL increase my positions. And I would not be a Guru because that is something I don't give 2 shits about.

Dammit, there's something wrong with my brain. Oh well, I guess the point of this post is that if things look like shit, I want to buy it.

My investment in Russia has actually turned positive and I'm considering adding more to Russia, along with Brazil once things get even worse there. I've recently added more to my precious metals positions too. Seriously, what's wrong with me?

2 comments:

  1. Be greedy when others are fearful.

    If we can buy our day to day items from the store when there's a such sales going on. Why can't we also apply this in the stock market? Im both instances they are a market place for us :)

    Thanks for all the great write up and also any future contributions too

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    Replies
    1. Hi Jovan,

      I agree with your sales analogy! Now the only thing is to make sure that the items aren't being sold on discount because they are expiring soon... or worse, expired already!

      No problem, I'm glad you appreciate skimming through my thoughts.

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