Oil Equities Remain Undervalued

[Donnachaidh]

http://www.sandersresearch.com/index.php?option=com_content&task=view&id=1345

By Carlton Meyer
Feb/21/2008

Few investors realize that most of the information they read is distorted by the power of major corporations to shape perceptions of reality. Major financial magazines and websites rely on advertisers to survive, so they fear upsetting their advertisers with bad economic news. Dismissing the current worldwide energy crisis is an example. Another recent example occurred after insiders at major banks and related financial institutions pocketed millions of dollars in bonuses by selling overrated mortgage-backed securities over the past several years. When this swindle became public in 2007, they massaged the financial media to call it a “credit crunch” brought on by “unexpected” losses from real estate.

Many financial columnists and commentators are more like corporate cheerleaders who provide no real information. Larry Kudlow at CNBC and Neil Cavuto at Fox News are examples of how one can become a multi-millionaire by cheering for the markets and their network sponsors. They are always upbeat and dismissive of those who suggest that bad news will hurt the markets. If the markets rise, this proves that investing in the financial markets is wise. If the markets fall, they announce this is a minor correction that provides an excellent chance to buy-in cheap. Threats to the markets from corporate interests, massive government debt, rising inflation, unfair trade, depleting natural resources, and falling wages are taboo subjects. Their solution to all problems is the mantra: lower taxes, easy credit, and faith in the free market.

New market index highs are highlighted, although each day should be a new high given inflation. If one takes inflation into account, the American stock markets have been flat for several years. This media control is the reason so few Americans heard the startling news that wholesale prices rose 3.2% in November.<1> This was not was the annual year-on-year rate, but the increase just for November; so the annual rate was 38.4%! A drop in October exaggerated the November figure, but one might think the “liberal” news media would highlight a 38.4% annual inflation rate to embarrass the Republican president. However, the story went mostly unreported because the major media and both American political parties are owned and run by conservative multi-millionaires. It must amuse them whenever they hear someone parrot their propaganda that the media is controlled by “liberals.”<2>

Investors may assume that unbiased information is found in reports from the three major ratings agencies: Standard & Poor’s, Moody’s, and Fitch. However, these “independent” raters subsist by collecting fees from the organizations they rate. This obvious conflict of interest was a major factor in the recent “credit crunch” scandal, but few investors are aware of this issue because the major media mostly ignored the story.<3> The free market makes this situation worse because banks and corporations can choose which ratings agency they will pay to rate them.

More at link above --

[pscot]

1. I'm not so sure about that

Two years ago PE's of 7 or 8 were common among the oil producers, equipment providers and refiners. Now it's more like 16 to 18. Long term, the oil service sector looks stronger than the majors, which are sitting on dwindling reserves.