Bear Markets Should Make You Feel Uneasy

By Roger Nusbaum | October 16, 2008 | 12:28 PM | 0 CommentsTweet This

I have been writing about Statoil (NYSE: STO) as a client holding for several years now. A couple of times I have shaved a little off as the stock moved way up. The first time I shaved some off was in April 2006. Crude oil was just getting to $75 for the first time and STO was around $33. The next sale was in May 2008 when the stock was around $43. That May sale represented about 25% of clients' positions.

So two and half years ago oil at $75, STO at $33. Today oil at $69 STO at $16 and change. The trade today was the number of shares sold in May at $43 times two. I was able to buy twice the number of shares for fewer net dollars, not sure my average price yet, but obviously far less was spent today than taken in six months ago.

Buying stock in a crash does not feel good. The next big move from here could be down and if that happens then the timing, short term, will turn out to be poor. 

However I have done some exhaustive research and it turns out we still need oil. Not only do we need it but a lot of other countries need it too. 

If the move to $147 was over done so too might the selloff be overdone.An important thing to remember is that the chance of something (oil, an oil stock, the broad market) going down a lot is much less after it has gone down a lot. Oil peaked at $147. Even if it goes to $50 (not my prediction), that would be a $19 drop from here. It has already dropped $78, the vast majority of the decline.

Unless you think we're all done with oil.

Again, this is uncomfortable. I don't know about any bottom but I know I bought after a huge decline.

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