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Oil Crash

A Contrarian's POV Over Oil

Written by Brian Hicks
Posted December 17, 2007

Trader's Note:

A picture really is worth a thousand words.

A few weeks ago, Ian Cooper recommended shares of global solar company LDK Solar (LDK – NYSE).

He recommended it for $29.50 a share.

Here's what he wrote on November 30:

Keep an eye on LDK Solar (LDK:NYSE). The company just secured an additional 344 tons of polysilicon supply for 2008, and started construction on its plant.

Now, take a look at a chart of LDK as of today:

chart

I have to admit. I've been in this business for 15 years... and that's probably one of the most successful trades I've ever seen.

Think about this for a second. On a day when the Dow was down big... investors in LDK made 20%. In ONE DAY!!!

But Ian has been doing this his entire career. In 2007 alone, his winning percentage rate is 71%. Out of every 10 trades he initiates, 7.1 are winners. And after averaging the winners and losers together, his gain per week is roughly 100%!

So it's no wonder that readers are storming the door signing-up to Ian's Small Cap Trading Pit service. Even though the ranks have swelled, you can still sign up for the year-end price of just $49 a year. But come January 1, the price for Ian's service will go to $99.

To lock in the super-low price, go here: http://www.angelnexus.com/o/web/3330

Now, on to today's Wealth Daily.

A Contrarian's POV Over Oil

I read a rather interesting article today from Conde Nast's Portfolio.com.

The title of the article is:

The Coming Oil Crash

Crude at $100 a barrel makes good headlines but ignores basic economics. Why oil prices are in for a 50 percent drop.

I can appreciate a contrarian point of view regarding the direction of oil. I mean, oil has almost doubled this year in price. When oil was approaching $100 a barrel just a few weeks ago, even I was getting nervous that the markets were setting-up for a fall.

But I think Portfolio.com's article misses the point.

For instance, the author, John Cassidy, argues that...

"...experts who are predicting the worst, based on geology and geopolitics, are missing the crucial role that economic incentives play in determining the price of crude. The tripling of oil prices since the summer of 2003 has unleashed forces that within the next two or three years will bring oil prices tumbling back down to below $50 a barrel. Looking even further ahead, prices could easily fall to $30 a barrel or even lower."

He's absolutely right about one thing:

Historically, higher oil prices have unleashed a tsunami of economic activity as oil companies ramped up exploration and production to make more profits. With more oil supply hitting the market from new exploration and production, prices came down. Sometimes they crashed.

However, this time "seems" different.

Here's what I mean.

Two months ago, the financial news service Bloomberg reported on a crisis in Big Oil that I think will forever change the way America gets and uses energy.

According to Bloomberg, in as short as 16 years, companies like Exxon and ConocoPhillips may no longer exist.

Here's a short excerpt from the report:

"There's a steady liquidation of the world oil industry... Exxon is buying back about $30 billion of its shares each year. If that continues, Exxon will have repurchased all its stock by about 2024."

In fact, the Big 5 (Exxon, Chevron, BP, ConocoPhillips and Royal Dutch Shell) are spending more on stock buybacks than they are on finding new oil.

This begs the question: With oil trading near $100 a barrel and demand soaring, why isn't Big Oil investing every penny they have exploring for more oil?

The answer is: There's no more cheap oil left to be found. And this is producing a supply crisis of epic proportions.

In the coming days I'll have a landmark report ready for you to read. It explains in detail why Big Oil is liquidating itself. Did you know for instance, that since 2000, BP has repurchased 60% of all its outstanding shares. It's planned obsolescence.

It's mind-boggling, when you think about it. And this crisis is about to hit the markets like a nuclear bomb.

However, this mass liquidation is providing investors with an once-in-a-lifetime opportunity to make a lot of money. You see, there's a whole new breed of oil and gas companies ready to replace Exxon and the like. And some are still very young companies that'll experience substantial growth in the years to come.

Stay tuned,

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Brian Hicks

PS - As I noted earlier, Ian Cooper's Small Cap Trading Pit service is really raising eyebrows. After averaging the winners and losers together, his gain per week is roughly 100%. You can still sign up for the year-end price of just $49 a year. But come January 1, the price for Ian's service will go to $99. To lock in the super-low price, go here: http://www.angelnexus.com/o/web/3331

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