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Wednesday, September 28, 2022

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Oil Testimony Today

8:01am OK, it looks like the big moves will be in oil today. I am leaning towards "Sell on the Rumor, Buy on the News" with oil but let’s see how this plays out. Big mover should be Haliburton because, if I had to summarize these hearings in just one sentance it would be: "Give Haliburton Huge Contracts to Build Refineries and Explore for more Oil or we will Tax you Back to the Stone Age!" Check this out: http://www.google.com/search?hl=en&q=dick+cheney+halliburton&spell=1

Like it or not, Dick Cheney will still be president for the next 3 years. Oh, did I say president, I meant to say President… I just don’t see him having made a lot of friends since leaving the corporate womb so let’s just look at some simple facts. Mr. Cheney’s Haliburton stock options have gone from $250,000 to $12Million this year. In October, when our hero was in the hospital, the options dropped $4M in value as oil prices went down. Unable to start another war this week, Mr. Cheney is just doing what you and I would do if our army were committed elsewhere: Calling for congressional hearings as to why oil companies aren’t spreading that profit around to the subcontractors!

Don’t forget, Cheney can’t sell those options until 2008 (assuming he isn’t elected President again). Now, when you have a stock that goes to $12M don’t you kind of get to thinking you should get $12M. And when it goes to $8M you still kind of want to hold onto it because you are sure it will go back to $12M again… But Phil, you say, Haliburton’s sales are only up about 5% this year but the stock is up 50%, what gives? Ah, I say, but profits are up 300%.

It seems that serving 1M soldiers TV dinners every night for $30 each is an even better business than overbilling on labor – who’d have thought? So anyway – expect Haliburton to hit options expiration at right around $60 and then take off but that does depend on how these hearings turn out. Excess profit taxes = bad, promises to look for more oil and increase production =good! Other random stock thoughts: Any good news will send Sirius flying, I am hoping for bad news to see where the bottom is first.

Toll Brothers sell off is ridiculous. Home Depot will be a buy at $39.5. Microsoft is really scared of Google but $400 will probably scare google back to $360 before the next move up. I option shorted Google yesterday – I will always disclose if I have a position. Pixar is priced like every movie they ever make will make over $500M! I am waiting for the run-up on announcing a Disney deal to leap short them. If I had to guess I would say high of $72-$80 and a drop to $55 the second they have any bad news.

Dreamworks p/e is 8 and Pixar’s is 30. The Disney deal holds Pixar up based on the assumption that evey Disney film they do will open at over $100M. A p/e of 40 with the assumption that they will bat 1,000 may be a bit too high…

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