Sitting on the sidelines…
August 17th, 2008 by Grant in: Energy, Investing, Oil & GasFor the last couple weeks I’ve been sitting on the sidelines trying to figure out how to play my hand in the market. There appears to be some semblance of rationality forming, but I think there are going to be new fundamentals arise that continue to beat back the bulls.
Crude oil ($wtic: chart) prices continue to drop, closing out the week under $114 per barrel, and natural gas ($natgas: chart) is maintaining ground just above $8 per MCF. Oil prices have dropped based on waning global demand, and natural gas prices have moderated for the same reason, just on a National scale.
On the topic of global demand, I have to wonder if the Chinese curtailment of demand during the 2008 Olympics has anything to do with the current oil market. Back in February, Beijing made the decision to halt manufacturing production in several locations during the Olympics in an effort to reduce pollution.
They also implemented an effort to remove 50 million cars from the roads for the same reason. According to the source, all of this was supposed to take place a month prior to the opening ceremonies in Beijing.
When did the price of crude start to retract? About 30 days prior to the opening ceremonies.
It’s just a theory right now, but I have to wonder if “global” demand will pick up after the closing ceremonies.
Time will tell.
Tags: China | crude demand | market | Olympics
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August 19th, 2008 at 8:21 am
[...] « Sitting on the sidelines… [...]
August 20th, 2008 at 9:01 pm
Hi Grant..
“For the last couple weeks I’ve been sitting on the sidelines trying to figure out how to play my hand in the market.”
I always like to hear what you have to say. Could you elaborate?
August 20th, 2008 at 9:14 pm
Sure thing Mike.
It appears that the effect of high energy prices is starting to creep into foreign economies, resulting in a global economic slowdown, not just a U.S. economic slowdown.
What this means is that companies whose financials were propped up by foreign sales may not be as robust as they were.
The financial sector is still struggling to regain any traction, as it appears that there are more casualties left in the lending and credit crisis.
Energy is off, and it’s really tough to tell why. Is worldwide demand slowing, or are we seeing money coming out of energy markets due to profit taking and slowed growth?
If worldwide demand is slowing, is it temporary? I mentioned that the Chinese shut down a significant portion of their manufacturing facilities in an effort to influence the air quality for the Olympics. So how much demand did they “temporarily” remove from the market?
PCU (copper) is down significantly. Is this a good time to get in and capitalize on the 9+% dividend? Maybe not if the world economy is slowing.
I guess I’m looking for economic indicators that extend beyond the U.S. influences that will tell me direction in the stock market.
Walmart is doing well, which you would expect it would in a down economy.
What do you think?
August 21st, 2008 at 12:26 pm
Thanks Grant..
I’m sorry.. what I meant was meant to be more individually-specific. I’m not trying to pry, I was just curious. If I’m getting too personal, just let me know.
When you are sitting on the sidelines, are you in cash (like me) or some other asset? If so, what percentage are you in cash or other asset?
When you say you are playing your hand, does that mean that you are looking to get back in the “stock” market or another market? Are you looking at a specific stocks, sectors, ETFs or mutual funds?
BTW.. I remember 6-12 months or so ago where it was being recommended that people need to invest “out” of the U.S. markets and “into” overseas markets. I was of the opinion back then, that that was foolhardy advice as one who watches theses things could see the writing on the wall.
Mike
August 21st, 2008 at 4:24 pm
Actually Mike I’m in about 20% cash right now, looking to get back into the stock market.
While I’m looking at specific stocks, I’m also trying to gain some insight into specific sectors or industries. If you can determine a short term (i.e. 6 months) to longer term (i.e. 2+ years) of what the economic cycle looks like, you can probably find some good securities right now that will produce good returns.
I tend not to look to overseas markets for one because I don’t understand them, and it takes additional digging to understand the market influences on a day to day basis. U.S. assets are easier to invest in because I’m fully immersed in the influences of those securities on a daily basis.