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Overbought Oil and Weekend Reading

Overbought Oil

The Globe and Mail reports that oil supplies are rising but oil prices aren’t correcting. Are we in for a big time oil price correction in the near future? Seems that something has to give. If you are a contrarian and willing to bet against the oil bull, the Proshares Ultrashort Oil and Gas on the AMEX (symbol: DUG) should do the trick. Do you think that oil will sharply correct?

Weekend Reading

Canadian Dream writes about getting beyond fear in investing.

The Financial Blogger teaches us The Importance Of Market Fluctuation.

Lazy Man and Money writes about The Future of Personal Finance Tools.

Canadian Capitalist explains the tax implications of foreign dividend investing.

My Dollar Plan teaches us to Turn Your Wasted Money Into a Debt Reduction Plan.

The Digerati Life shows us how to Increase Your Salary Without Increasing Your Work.

Thicken My Wallet tears down Facebook as an investment.

The Sun’s Financial Diary writes about some credit card customer service issues in his article Well, Credit Card Companies are the Same.

Brip Blap has an excellent article that shows us the simplest actions have profound effects.

Quest for Four Pillars has written an entertaining article “why are some parents morons?

Money Smart Life gives us Three Ways Your Boss Can Save You Money on Gas.

Generation X Finance lists Ten Steps To Take When You Are In Financial Trouble.

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FT About the author: FT is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.

{ 12 comments… add one }
  • Avatar The Financial Blogger May 23, 2008, 8:21 am

    Thx for the mention!

    I also bought a few oil barrels to store them in my basement; I plan on buying my Bmer with them in a few years ;-0

  • Avatar grant hornsby May 23, 2008, 9:03 am

    thing about oil is this even though we’re at record highs – i wouldn’t bet against oil at lesat not in the short term. shorting it you could lose your shirt! and more!

  • FT FrugalTrader May 23, 2008, 9:08 am

    Grant, you are right, the long term prospects of oil are only going higher. My speculation is for the short term only.

    My suggestion is that if you’re going to trade the oil short ETF, make sure to trade with tight stop losses!

  • Avatar Four Pillars May 23, 2008, 9:16 am

    Thanks for the link – I hope you aren’t going to be one of those parents! :)

    FB – that’s funny.

    Mike

  • Avatar Dividendgrowth May 23, 2008, 11:20 am

    Unfortunately, oil could be going higher, which sucks big time.. One things that you learn trading futures is that you should never go/trade against the market.
    Maybe some UGA ( united states gasoline trust) might be a good idea for hedging gas exposure..

  • Avatar Canadian Capitalist May 23, 2008, 11:48 am

    Thanks for the link. Have a nice weekend. Cheers!

  • Avatar GIV May 23, 2008, 1:07 pm

    I particularly enjoyed Thicken my Wallet’s facebook post. Always interesting to read rational business-focused ideas on something as frivolous as facebook

  • Avatar Wiser Miser May 23, 2008, 8:51 pm

    The quick rise in oil prices has created a very tempting reason to try shorting oil. HOD and HED, both on the TSX, can help you accomplish that but it offering ~2x the move of the commodity / index, I still haven’t figured how much, if any, I should invest / gamble in it. In any rate, it would be a short-term position in my portfolio and I definitely would have to keep a very close eye on it and place a stop loss.

    Another way to bet on lower oil prices would be to invest in airline stocks. As big consumers of oil, they can only only benefit from lower oil prices.

  • Avatar ThickenMyWallet May 23, 2008, 9:12 pm

    Thanks for the mention and thanks for the kind words GIV.

    As for oil, I wonder if we have gone from the tech bubble to the real estate bubble to the commodities bubble. Too much easy money, not enough good deals.

  • Avatar JR May 25, 2008, 9:24 pm

    FT:

    interesting that you picked (symbol: DUG). The fact is nobody knows if or when a correction would take place.

    Suppose you, any of you stock investors are stargazer and somehow know the oils will fall within 6-months (depending on the outcome of the US elections), then you would be a winner … right out

    One should consider hedging against the hedge just in case the oil keeps pumping $$$, shooting to the stars.

    One other possibility is UYG.

    By hedging one could simply buy either stock symbol & there are many more, sell the call option long (jan-09) at the money, collect around $5, and if oil keeps on shooting up, the stock price goes down. The $5 money that has been collected as safety will go to zero. Your choice at that point is to do nothing or simply close the contract and sell the stock.

    Then should the oil or financials go the other way (down), the stock goes up, you will be called and collect around 19% for 6-months. Now that aint too bad.

    When a stock has options plus paying dividends, then one should consider taking advantage of the fullest benefit, not just simply buy and hold

    Then again no one knows what is the right situation or which direction the market or oil prices will head until after it happens.

  • Avatar JR May 25, 2008, 9:42 pm

    BTW, on stargazing, BAC is one of my picks (nice dividend & nice hedge on its options), as is the larger airline stocks AMR & UAUA.

  • Avatar ETF Income May 27, 2008, 11:35 am

    I believed HOG concentrated more on American oil companies and HEG is for Canadian oil companies. It could goes as far as $150/barrel before it will correct. Prepare to buy these ETF after the China Olympics.

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