bowman711

Options Trader: It's Deal or No Deal Friday

The Balance Sheet for Oilsands Quest (BQI) shows that they have 646,000,000 in assets to only $154,000,000 in liabilities. It has gone from about $7.00/share down to $2.78/share in the past few months. I've ridden it all the way down because they look sound enough to me to ride out whatever happens to the rest of the economy. I figured that if they could get only 1/4 of their oil reserves out of their holdings, at $100/barrel there would be some $25-28 of oil per share.

Even if deflation goes down 90%, and oil goes down to $10/barrel the oil would still be worth the same proportion - $2.50-2.80 a share. At any rate, I think this company is sound enough, and its value is in oil in place should retain its value, so hopefully after all the fallout to come, BQI shares should have about the same relative value in relation to the rest of the economy as it did before all this financial mess started. At least, that's what I am 'banking on.' Once the world economy starts operating on all cylinders again, I expect oil demand will eventually pick up to the levels now seen.

On the other hand, if central banks around the world manage to inflate the economy out of trouble for the time being, oil will increase in price to reflect whatever inflation there is - $150, $200 or whatever a barrel - and then the oil BQI has in place in the ground will also increase in value. [The huge drop in price in the last two or three months is reflecting the expected slowing economy, not the relative value of the oil in the ground.]

Therefore, I'd say that investing is SOUND companies, where most of their value is in their commodities in the ground, should come out of all this uncertainty in relatively good shape. It may take some years for the world's economies to rise up to past levels, but it eventually will.

Don't get me wrong - I have significant positions in DGP, CEF, and SLV, gold and silver ETFs. But, I think holding companies with ore or oil reserves should supplement gold. You might not like BQI as much as some other company. Fine. Take your pick of any number of sound companies that have almost nil chance of going bankrupt.