Roger Nusbaum submits: Some portion of the selling in energy and materials stocks is part of a 'window dressing' effect. Either some managers are really doing this, or some traders think that managers are doing this. Also some of the commodities are having the same issue, and natural gas has also been hit by the unwind of Amaranth.
I have no idea how to quantify the effect, and I am not an energy bull calling a bottom. I think that after going down in price almost every day, related assets will correct up a little as the next quarter starts. After that maybe more selling; I don't know.
All of the long term supply and demand issues that drew me to the sector are still in place. Shorter term there is more uncertainty, obviously. Energy has gone from more than a 10% weight in the S&P 500 to 8.9% as of Friday. I have not sold any energy since May, so in a way the sector has reduced itself in portfolios I managed, which is good, but on the negative some of the names I own that did better than the sector on the way up are doing worse on the way down.
My conviction in the long term, combined with never having gotten carried away with how much I owned, leaves me standing pat for now.