RSSMr. Tree, Meet Mr. Forest
By Roger Nusbaum | October 20, 2008 | 12:43 PM | 0 Comments
From 30,000 feet I am a bull on oil and have been for quite a while. The big macro for me is the global ascendancy theme unfolding in fits and starts around the world. The stat for this concept is that the US uses about 25 barrels per capita while China uses about two and India a little less than one barrel. These numbers, and for other ascending countries, are going higher over the next few years.
That is the long term, the short term has provided a crazy year or two. At the start of 2007 oil plummeted, in the first half of 2008 it skyrocketed and in the last few months it cratered. Short term predictions are not my strong suit but I will say that volatility will be ever-present but hopefully up 100% followed by down 50% is behind us.
Last week I put a little more money where my mouth is by increasing exposure to the sector at what I felt was a panic price, we'll see how that one works out.
An important element of portfolio construction and then ongoing management is know whether you think short term movements matter more than long term themes (no wrong answer) and then, I think, blend the two together somehow.
Some folks don't care about the big picture and could be thought of as being shorter term traders while some others only care about the long term. While, again, I can't say one is right and the other wrong anyone falling into one camp needs to be cognizant of the other. If you prefer to trade around a theme like oil you probably need to be aware of the growth potential of consumption.
My preference, as outlined in past posts is somewhere in the middle. I have in the past lightened up at points I thought were too high and added exposure when I thought prices were too low, both with an eye to the longer term.
One final point is that there we are currently enduring a crash and or aftermath of a crash. Changing from trader to investor or vice-versa in the middle of this sort of event is very likely a bad idea.
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