It depends on how long your holding period is.Is crude undervalued ? Yes,it is.But the problem is it can go even lower next year.Marc Faber is predicting a rally in asset prices and given the oversold conditions it may well occur.But it will be short lived (if it occurs) and there would be a falling off the cliff kind of fall.My point is crude and hard assets could go down with it.One must have the discipline and patience to sit through that if it occurs.The number of rigs exploring oil in the US fell today.Jim Rogers made the very important point that the current credit crunch would mean less mining,less drilling.At the same time the bail out has reached 7 trillion and counting (The Second World War was unbelievably "cheap" at 3.6 trillion).
http://www.ritholtz.com/blog/2008/11/big-bailouts-bigger-bucks/
The budget deficit projected as 1 trillion would go up to 2 trillion by the time Obama goes through.Although Paul Volcker appointment almost threw me into a panic and and made me want to sell my gold,I don't think there is the political will be follow his advice.And the American public still believes that Obama is some kind of superhero who will save the world.They are not yet ready for tough decisions.My point is there is no "risk" of proper fiscal policy from the Administration.
When to buy?
I buy on the basis of fundamentals-people are drilling through hard rock under the sea to get oil.
cited the technological challenges in producing a field that lies "under 7,000 feet of ocean water and more than 16,000 feet of rock, sand and salt, including a 1.2-mile-thick layer of rock-hard salt."
http://www.energybulletin.net/node/38218
Nobody does that when oil is easy to find.Maybe I am too simplistic but then I am just an average Joe.There could be deeper issues involved.I believe in the concept of Peak Oil-we are not running out of oil but we are running out of oil that is easy to find and extract.
So I would buy when there are huge crashes like some GDP data pointing out the obvious-the US is in recession and has been for some time.Growth will not come from the US,it will come from China.A couple of years from now we will have the perfect storm-China starts to recover,many exporters turn importers because of falling production and rising consumption,US bonds collapse taking the dollar with it,the credit crunch would have taken most exploration projects and companies to the cleaners and last but not the least the Fed forgets to close the liquidity pump.
Since I can't time the markets I would buy on declines.If one is very competent at charting,one might be able to time this perfectly
Just my two cents.
