Let’s talk about oil companies

  • April 27, 2006
  • Gary Kaltbaum



Gary Kaltbaum is an investment advisor
with over 18 years experience, and a Fox News Channel Business Contributor. Gary
is the author of

The Investors Edge. Mr. Kaltbaum is
also the host of the nationally syndicated radio show “Investors Edge” on over
50 radio stations. Gary is also editor and publisher of “Gary Kaltbaum’s
Trendwatch”…a weekly and monthly technical analysis research report for the
institutional investor. If you would like a free trial to Gary’s Daily Market
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click here. 888-484-8220 ext. 1. 

Off my recent rant on
government and oil prices, I received a record number of emails.
So…to not let a good thing die down, I give you part 2. Here is what our
good friend Chuck Schumer had to say:

 

“We also have to re-examine whether having only a
handful of giant oil companies can co-exist with the needs of the American
consumer and a rational energy policy in this country. I do not believe it
does. And so I’ll be offering an amendment to the supplemental that will
require a complete examination as to whether or not we should break up the Big
Oil companies. Enough is enough. We have no competition.”

 

Hey Chuckie, there is only one business that has
no competition and you are in it…our state and federal government. In case
you don’t know Chuckie, the amount of profits these oil companies have taken
in pale in comparison to what government takes in on gasoline…BY A WIDE
MARGIN. I have an idea. If you want to break up the oil companies, let’s break
up the government. After all, monopolies should be broken up…and you are a
monopoly. You can tax, you can borrow, you can spend, you can give yourself a
raise and you can be bribed by lobbyists without anyone having any say in the
matter. In fact, I just loved the latest watered-down lobbyist legislation.
Isn’t great when the inmates run the asylum and get to set the rules and
regulations for themselves. 

I have another idea, if you want to vote in a
windfall tax on the oil companies, I think I am going to start a movement…to
declare a windfall tax on government. Yes…. I really believe you guys just
make too much money…and that’s just not fair. As you said, when someone or
something makes too much money…something should be done.

 

I have some very specific things to say sector-wise
while the major averages continue to do just fine.

 

In my last report, I told you I thought the
COMMODITY areas were due for a pause/correction. I still believe so…but
wanted to pick them apart. OILS look like they hit a wall on Wednesday and
suspect there is work to do on the downside. I actually found a few names that
were breaking down. Many base metal names also felt toppy Wednesday. Names
like PD feel like there is some corrective work ahead. GOLD is extended, noisy
and overbought but so far…has not give in. It has had one violent
pullback…which lasted one day. At the very least, just know risk has picked
up here. STEEL is never going down…never ever ever.

 

Other areas:

 

I believe GAMING put in a near-term top on
Wednesday. A few names went parabolic and were due to correct. I would only
buy on further pullbacks right now.

 

RESTAURANTS are now getting pummeled. The
laggards are toast and now the leading names are starting to roll over. Avoid
at this juncture.

 

HOUSING continues to go no place fast. Every
attempted bounce has been hit with a big bout of selling. I suspect there is
more downside work even though a few names are already at yearly lows.
Continue to stay away.

 

BONDS are gross and remain in a bear market. Hand
in hand with that is the UTILITIES. Continue to avoid.

 

The good news is I am seeing a few things emerging
here.

 

For starters, I am liking the set ups in the big
BANKS.
(
BAC |
Quote |
Chart |
News |
PowerRating) broke out, as did 
(
WFC |
Quote |
Chart |
News |
PowerRating):

INSURANCE companies are setting up perfectly. 
This is one of the only areas with long bases to buy off of. Take a look at
the charts of
(
MET |
Quote |
Chart |
News |
PowerRating) and
(
PRU |
Quote |
Chart |
News |
PowerRating) to see what I am talking about.

 

Defensive CONSUMER stocks are starting to roll on
the back of a plummeting dollar. Names like BUD, CL, CLX and others are now
kicking in gear. I am not so sure they have the growth rates for any
meaningful move but will be watching.

 

Major averages refuse to give up any ground.
Underneath the surface, I am finding both bull and bear markets side by side
in differing sectors. You cannot throw darts at this time.  

Gary Kaltbaum