With the price of a barrel of oil continuing to reach record highs you'd think that I'd be all but tripping over myself, getting to my broker, to fill-up on as many oil stocks as I can get my hands on. You'd think that I'd be screaming in utter amazement why in the hell isn't everyone riding this oil roller coaster? Including those who don't have the faintest clue about the stock market. And you wouldn't be so off-base to think so. It makes perfect sense, right? I mean, gas prices are not going to come down for the foreseeable future, and there's still a ton of those gas-guzzling monsters on America's highways, the hybrid vehicle market is confused about what kind of alternative energy technology it wants to utilize...so, what's to be weary about, about oil?
In my opinion, a lot.
As I see it, right now there's just too much excitement in the oil markets, and that makes me a bit nervous. There's also a ton of hype. It's a market rife with scare tactics galore. The price of oil rockets upward at even the slightest hint of bad news. Quite literally oil is on fire, and it's starting to get a bit carried away.
Don't get me wrong, the run up is not quite over yet. There's still an interesting amount of upside in the oil sector, and therefore an opportunity to continue to profit from all the hoopla. In no way am I advocating throwing in the towel altogether on this black gold. That would just be plain silly. But I am saying I don't think you should bet too heavily on it either.
It's sort of reminiscent of that great era of the Internet stocks, and the technology boom that rode on its wings with companies like CISCO, AOL and Digital Island (just to name a few) raking it in. These companies were all the gab, and they were making their investors very rich, very quick. The most recent housing boom had similar effects, and now the whole industry surrounding real estate is left to scratch their heads in the aftermath and wonder starry-eyed about what went wrong.
Like all things that go up, they eventually must come down. It's just the nature of things, and oil is no exception. It will fall. And why shouldn't we think it will?
Of course, at this point it's anyone's guess exactly when this certain bust in the oil markets will occur. No one can predict the future. But one can see the signs of a correction looming the more outrageous the market gets. It's getting pretty outrageous now.
So, in the meantime I'm still buying into oil. But I'm keeping a watchful eye on those flames. I think you'd be right to as well.
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