Stocks vs Oil, which gives better long term potential?

Discussion in 'Economics' started by crgarcia, Dec 5, 2008.

  1. I know they are apples and oranges, but, please tell me the pros/cons of each one.
  2. First, you must define what "long term" is.
    Second, you must define what your own personal threshold for financial pain is during that period.
    Third, you set an appropriate risk/reward which considers the defined time and pain. (You must also define what appropriate risk reward is for you and only you).
    Fourth, make the trade, or take a pass.
  3. thedewar


    yeah depends on long term....
    oil could well double over the next two years...
    most stocks wont..
    unless you buy penny stocks or some new and exciting thing thats gonna be the worlds next ipod (some kinda consumer device everyone wants)

    so if you want a safe investment.....

    dont buy anything, put it into a money market account and make 4%

    i'd buy oil but thats just me

    if you buy oil futures you can take on alot of leverage and make some obscene gains if oil does go up in the next year or two

    if it crashes you'll lose everything

    stocks may or may not rebound in the next while.... i wouldn't recomend any long term holds just yet, will probably depend alot on how the US gov't responds the the economic crisis and if there's any sort of rebound.

    do some research, and i'd recommend more research than starting a thread on :p
  4. You could buy DXO thats a 200% leverage oil ETF.

    Its at 2$ a share now so when oil goes back to 60$ you doubled your money etc.

    Not bad so you might want to start buying, maybe wait for oil to hit 30$ a barrel but thats anyones guess really.

    Best of luck.
  5. piezoe


    Oil, i would think. I rather like all commodities at these prices or lower. Who knows? Look at Rio Tinto for example. It's 90% below its high. And if you sold the juicy puts, as I have, you get in even lower than that if exercised. Otherwise you make a killing on the puts. And on top of that the stock at 60 is paying about 7% or so and has a P'E of < 2. The only thing that makes that a bad deal is if the sun burns out.

    Debaser (or is it debased?) had an interesting idea re oil.
  6. richrf


    I am staying away from oil. Reasons:

    1) Most of the run up was asset inflation, just like homes and the tech bubble. Leveraged speculation is gone from all asset markets.

    2) I never invest in a commodity during a deep recession. There is no fuel for takeoff.

    3) Fuel efficiencies will bring back U.S. oil usage to 1990 levels. SUVs are gone from the highways. Greater reliance on small cars, and more efficient energy use will keep prices relatively low for the time being. Remember, oil was at 10 before Oil Baron Bush got into office.

    4) Russia and the Middle East have to keep pumping like crazy to achieve their balance sheet objectives. Inventories will continue to grow.

    Oil may go up, but I am personally putting my money into equities.
  7. One is a commodity, and the other is a part ownership in a profit-making enterprise.

    Plot both of them over the long term adjusted to inflation and you'll quickly see that (with the exception of the lunacy of the last year or so) the very long term trend shows the stocks moving up, and the commodity staying flat.

    Yes, oil is half of what it was a few months ago, but stocks are close to that too. Yet, a dozen or so months ago, stocks were still up there, but oil is not. Compared to a couple years ago, oil is *still* impossibly high and stocks are impossibly low.

    IMHO, the only way to get rich in commodities it to leverage yourself really good. But thats also a great way to go broke too.

  8. Great post!

    I share most views, so I'm also going for stocks, long term.
  9. richrf


    Thanks. I hope I am right. :)
  10. Some good points in this post.
    #10     Dec 10, 2008