bearfund

The Triple Play: Oil Addicts, The Credit Crunch and Deflation

Got that right, mixter. If you don't like the price of oil, you should use less of it and/or buy stock in oil companies. You'd think people would understand that if you're consuming something and don't intend to stop, you are effectively short futures on that thing; if you expect the price to rise, you should hedge that out by building long exposure elsewhere. It's amazing to me that every car-owning American doesn't have a few hundred shares of some oil companies socked away somewhere. As an example, STO just paid out about $1.67 per share. If you use 2 tanks of gasoline a month, we'll figure that at $120. So 900 shares of STO would cover your gasoline bill, more or less indefinitely, regardless of whether oil and the stock itself go up or down. This is a stock that as recently as January could be had for $25; considering the fact that interest rates are negative, securing a lifetime supply of gasoline for a one-time investment of about 23 years' inflation-unadjusted cost at $22500 should look pretty attractive. As a bonus (and a big bonus it is), the more oil goes up while you hold it, the bigger your profit when you eventually quit driving and sell your shares. Similar calculations could be done with XOM or XLE or Canroys or even futures and options, depending on which risks one is willing or unwilling to take on. I guess Americans are afraid of or don't understand the capital markets; in the era of ETFs and easy access to every kind of security (and the constant creation of new ones) they offer plenty of ways to take on, or hedge against, almost any imaginable combination of risks.

Instead of using the system we already have, they'll demand some boneheaded moves from Congress. This kind of reaction is why I find America so unappealing as an investment target. The people have no discipline and would rather whine and blame others than get their own houses in order.