I beleive there has to be a rebound of the oil price as it has just been far too low lately just as when it was $140+ it was far too high based on the underlying circumstances prevailing at the time. Speculators certainly played a part then just as they are playing their part now. Last year I predicted that $200 oil was on the horizon and that could have been the case were it not for the catastrophy that happened. Will we see $65 oil in the near future well I guess we might but only because OPEC intend to cut so much from the supply chain and not because there is a real shortage today. I am looking forward to the real move which will only come after we have seen the end of this depression by at least six months. I don't think Connacher will move much in the positive direction until the ALGAR project is re-initiated or bitumen goes >$30 for a prolonged period which is probably the same thing or we see an end to the depression. When will the depression end or more interestingly when will the markets bottom out? I look at it like this:

Some rules:

1.) Is the recession just a cyclical recession or is it accompanied by a financial crisis or global recession. If the latter then expect a minimum duration for house prices to be in the doldrums of 4-5 years before any sort of recovery and stocks sliding for at least 2-2.5 years with only bear market rebounds to look forward to.

2.) Close to the end of the 2 years I will compile a list of stocks that I would like to be long in and a list of potential shorts, this will be at the end of this year. If the list of longs is >55% of the total I will make the following further assessments:

3.) I will check if average earnings figures for S&P are slowing it’s decline or even looks like reversing and check if P/E’s are indicating companies in general are looking cheap. Only then will I up my participation in the markets. Hopefully I will have saved up some cash or liquidated some of my assets for amunition. Right now the P/E ratio for S&P is anything but cheap based on predicted earnings expectations during what will surely be a deep recession. I will stay out for the most part if I can resist the temptation.

Based on the above I will be putting most of my activities on the back burner exept for the fact that there are of course some stocks around even today which are extraordinarily cheap and in this case I am making an assessment based on dividend, P/Book and future P/E. I will base the future price on a multiple of 10 * what I consider to be a conservative estimate of future earnings, say in 2011. If the projected price is >150% of today’s price then I will be satisfied that the error of margin is sufficient to warrant a buy. I will give an example.

VEDANTA (UK)

I purchased this recently and am doing OK so far. The figures today are:

Price = 709p

Cash On Hand = 5.4 (Billion)

Debt = 4.6 (Billion)

Nett = 0.8 (Billion) A good position in this climate.

P/E = 3.4

Price/Book = 0.3 every 30p buys £1 of company.

Dividend = 30.14p

Yield = 4.5%

Price Projection (2011) based on predicted earnings * 10 = 2300p

Potential Gain = 228%

These are the types of stocks Warren Buffet is scooping up at the moment and the types I mentioned in my comments in an earlier post about buying speculative stocks today.

Although I bought earlier (Not at the bottom but close) I have added today again because I believe there is still enough margin to be safe and take a chance. I will be looking for further stocks to assess as I go, although my spare cash is of course a bit limited right now.