Yawn, Oil is Up
Investment Research for Online Investors

by John Dalt

02/19/09

Today was a yawner. Some days, you wake up ready to go, and nothing happens. I expected the market action to run higher then turn over, to dive for the depths of despair. This would set up capitulation, which is what the market needs for buyers to be convinced a bottom is in and it is ‘safe’ to buy. Bottoms do not feel this safe. The screaming in despair cannot be heard around the world, unless you own financials. I closed out our positions in GLD and SLV yesterday in the SwingTrader for 10% and 29% profits. They may run a little higher, but I expect a hard fall before they go parabolic. A lot of ‘hot’ money is playing the ETF’s and will flee at the first sign weakness. It could make a short squeeze look like a touch football game. There is still deflation, and the dollar is too strong. Gold is at an all time high in other currencies because of the strength of the dollar. Most of the present demand for precious metals is in the U.S. It bothers me when everyone wants to get in; the ads on TV are back to back. When the dollar starts to fall, we should see a real run on precious metals as that would price the rest of the world back into the market.

How bad are financials?  I closed our position on 2/10 with a 38% loss.  This was the largest loss I have taken in the SwingTrader.  This was a play on the government rescue for banks and it became obvious that Geithner had no plan.  The ETF is down another 50% in the last seven days!  This is proof again that even a dramatic loss is better than holding on for dear life, until there is nothing left.  It is so cheap; we might play it again, if we get a hint of good news.  Strength in financial stocks could make this market take off like a balloon full of helium, but remember there is probably a pop at the end of the flight!

USO took off today, as the EIA reported a contraction in inventory levels.  The dollar showed a small crack, and interest rates rose.  The new reports are not posted on EIA’s website yet, but I found a week old report that had some interesting information.  Non-OPEC production of crude oil in 2009 is expected to increase by 150,000 barrels per day.  Leaders are the U.S., Brazil, and Azerbaijan.  These increases may not materialize with lower oil prices.  Last year’s U.S. production increases were mainly attributable to three platforms in the Gulf of Mexico.  Brazil’s Petroleo Brasileiro (PBR) has slowed drilling due to low prices, and the government wants a bigger share of the successful wells they find.  Azerbaijan had better be careful; the Russian Bear threatens any country that appears to challenge Putin’s supremacy.  The largest production declines were in Mexico, the North Sea, and Russia.  Previously, Russian output grew by 3 million barrels from 2000 through 2007  This represented 75 percent of total non-OPEC oil production growth over that period.  You can read more here.

Citi (C) and Bank of America (BAC) are suffering from rumors and concerns that the U.S. may move to nationalize them.  David Axelrod, along with the rest of the administration have talked down the economy enough.  They own it now; they need to start cheering the 94% that are working, and people that pay their bills.

The Dow closed at it's lowest since October 4, 2002!

The S&P500 closed at it's lowest level since March of 1997!

What did you think he meant?

“My friends, we live in the greatest nation in the history of the world.
I hope you'll join with me as we try to change it.”
                                                   -- Barack Obama

''Life's tough......it's even tougher if you're stupid.''
                                                    -- John Wayne

If you are looking for a little distraction check out our Funny web pages. I have posted a few new ones today.

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions. It may contain errors and you should not make investment decisions based solely on what you believe you have read here. Do your own research, it is your money. If you lose it, it is your responsibility, not ours or your grandmothers! The editor may or may not have a position in any securities discussed. The editor may have held a position in a security earlier, or in the future.

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