5/25/2004, Jim Jubak of MSN Money Fame advises his readers to buy OIL, $40 is cheap.......

[ShaneGR]

http://moneycentral.msn.com/content/P82361.asp

Wall Street loves a consensus. Its smitten with the notion that its time to dump oil stocks because the price of oil may be headed back below $40 and will likely wind up below $30 by the end of the year.

Thats why the share prices of ChevronTexaco (CVX, news, msgs) fell 3.3% in the week that ended May 21, why Shell Transport and Trading (SC, news, msgs) was down nearly 2% in the same period, and why BP (BP, news, msgs) dropped nearly 2.7%. Those declines dont seem like much until you note that theyre about four times or more the size of the 0.46% drop in the Dow Jones Industrial Average ($INDU) during what was a bad week for that index. Its all downhill from here, right?

Wrong, wrong, wrong and wrong.

A 1% or 2% drop isnt much of a buying opportunity, but I think this is the time to be buying more shares of oil producers and refiners rather than selling the ones you have. Specifically, Ill be looking to add shares of ChevronTexaco after OPEC meets on June 3. The stock market is expecting an announcement that OPEC will boost production, and I think that announcement could dent oil stocks in the very short term.

But the stock market is dead wrong about the power of the Saudis or any other oil producer to move prices much below $40 before the end of the summer. And investors are dead wrong who believe that a decline to $35 by the end of 2004 would hurt oil company earnings. At $35 a 42-gallon barrel, the oil companies would bury the current Wall Street consensus on oil industry earnings under a pile of profits.

Oil is currently trading above $120 a barrel, a 300% profit increase above the "pile of profits" Jim Jubak talked about. He was RIGHT. Very, very, very right. It was a good bet back then, an oil man in the White House with full congressional support until early 2007.

[JDPriestly]

1. The bust is on its way.

[DerekJ]

2. At what price point will the economy stop functioning? Like THE breaking point. $200?!! $300?!!