Macro Tsimmis

intelligently hedged investment

SELL United State Oil (USO)

Posted by intelledgement on Wed, 23 Jan 08

We are selling here on increased risk of a deep recession. A reduction in US demand at this point would affect energy demand in the rest of the world to some extent, at least temporarily. We expect to be back long here, as energy remains a good long-term play, but we anticipate getting back in at a better price point ($70 or less).

As for IXC, long term, as stated, we see energy assets as strategically benefiting from high demand, and the effects of the current downturn on the broader energy complex will be ameliorated to some extent by short term lower oil prices (as it will improve the crack spread and thus profit margins at refineries). If things continue to deteriorate, then we will reevaluate the value proposition of stepping aside on IXC as well, but for now we are holding on there.

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