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Here's my concern about the oil industry. Really big producer Russia and significant producers Iran, Venezuela and Iraq can't balance their budgets on low oil prices but they also can't cut back on production because they need cash. Saudi Arabia, another very large producer, is defending its market share and isn't unhappy to inflict pain on Russia, Iran and the fracking industry for different reasons but nonetheless they don't have a big incentive to cut back on production.
The US, another very large producer nowadays, has made significant capital investments that won't just get turned off. The projects that will get slowed down or turned off will have an impact years from now because the current price creates an incentive for some of the already large producers to keep producing in order to service their own national interests as well as debt .
I don't disagree with most of what's been said here- averaging in is far more reliable than trying to pick the bottom, there will be opportunities, some of the associated stocks that have been pulled down without a strong economic connection are probably already opportunities. I'm just not sure with the considerable economic AND importantly political headwinds, that its time yet to be committing additional capital to energy investments even on an averaging in basis.
"Here's my concern about the oil industry. Really big producer Russia and significant producers Iran, Venezuela and Iraq can't balance their budgets on low oil prices but they also can't cut back on production because they need cash."
I'm concerned if this goes on for a while some of the oil producing countries may see social unrest.
@scott, a valid point! Russia, Iran, Venezuela among others. In Russia it will be blamed on us and the people won't be as likely to protest, but in most other places, it could get ugly and that won't be good for anyone, but it will raise the price of oil.
Comments
The US, another very large producer nowadays, has made significant capital investments that won't just get turned off. The projects that will get slowed down or turned off will have an impact years from now because the current price creates an incentive for some of the already large producers to keep producing in order to service their own national interests as well as debt .
I don't disagree with most of what's been said here- averaging in is far more reliable than trying to pick the bottom, there will be opportunities, some of the associated stocks that have been pulled down without a strong economic connection are probably already opportunities. I'm just not sure with the considerable economic AND importantly political headwinds, that its time yet to be committing additional capital to energy investments even on an averaging in basis.
I'm concerned if this goes on for a while some of the oil producing countries may see social unrest.