This week we are recommending Nordic American Tanker (NAT).  This company owns and operates tankers responsible for carrying crude oil.  The company is actually down 14% on the year which is strongly underperforming the markets gains.  At Fiscal Frenzy we think that in the short term should the market rally this stock should also rally and outperform the markets to make up for lost ground.  The reason we feel this way is that despite the performance this year the companies fundamentals are still very strong. The stock pays a dividend of $2.00 a year or almost 7% which is a great yield during this economic time.  Looking at charts of this company it is clear that should the markets present a good buying opportunity in the near future, investors should pick up shares as the stock can make a push up to $33 in a short amount of time.

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The Dow and S&P finished this week in positive territory and today’s gains sent the Dow positive for the year.  On the day the Dow gained .3%, the S&P gained .14%, and the Nasdaq dropped .2%.  Although the gains for the Dow, 28 points, were small they were enough to push the index up .26% on the year.  Despite being down the Nasdaq is still out performing the Dow and S&P  (+5% YTD) on the year as the Nasdaq is up 18%.  This week added to the impressive totals the Dow and S&P have made since March 9th while the Nasdaq was down .1% on the week it is still performing the best in the last three months.  Since March 9th, when the indexes were bottoming out at 12 year lows, the Dow, S&P, and Nasdaq have gained 34%, 40%, and 47% respectively.  The markets were held to modest gains this week as the price of oil and gas has continued to surge in the recent days.  Oil closed the trading session at $72.25 a barrel.  Oil has surged more than 60% since March 9th when the markets bottomed and Fiscal Frenzy recommended a buy in oil.  Despite the recent surge in oil this week the energy sector was not as strong but still outperformed the markets by rising 1.36%.

OPEC today signed a level of uncertainty as it decided against cutting oil production and decided that it would meet again on May 28th to review the decision and make any changes necessary.  For the time being, however, oil production by OPEC will remain the same likely lending oil prices to trade down tomorrow. 

The group met in Vienna today to decide what to do with the plummeting prices of oil which have now fallen down to just over 46 dollars a barrel.  As OPEC looks to increase revenue, they also have to decide on how big of an impact the hightened costs of oil will have on other nations.  Specifically, the United States is a key player with Saudi Arabia, the largest oil producer in the world behind it. 

Today’s decision will likely not affect oil prices very much although one may see a decline since many investors were expecting further cuts to oil production.  Those investors may be getting out now, so expect oil to drop some tomorrow but without a substantial impact on the overall market, the indexes will need to rely on some other news to buoy them up or send them down the drain.

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In the past few months as the focus of investors and analysts has been on the financial meltdown, job losses and housing prices, many seemed to have lost sight of prices of oil as it has taken a back seat during the credit crunch. At Fiscal Frenzy we feel this is not the right approach as oil has seen quite some important volatility since it fell from almost $150 a barrel to it’s current price just above $45 a barrel.  To get to the 45 dollar range, oil has experienced a major rally over the past several weeks jumping a whopping 50 percent from the low 30s to its current price.  Although oil has already been rallying we feel conditions in the Middle East, specifically growing tensions with Iran, are prime for oil to break into the mid 50’s and possibly low 60’s in the coming months.  

Oil does trade separately from the markets for the most part which explains the rise in the price of oil the past few weeks while the Dow is sharply down.  There used to be  a time when Oil traded inversely with the markets and for some time since July both have been crashing together however all in all there is no direct correlation to be examined.  For this reason if oil does rally as we expect it to, don’t look to profit from investing in oil stocks such as Exxon Mobile (XOM) or Valero (VLO) which will more likely than not follow the markets downward.  Rather invest directly in oil itself to weed out the seemingly bipolar investors of companies that trade with the flow of the major indexes and base investments on not logic and reason but on the strategies of the many.