Friday, June 20, 2008

Good Point About Trading

In the free markets, if something can’t be produced for a reasonable profit then soon it will no longer be produced. This truism of capitalism even applies to such a capital-intensive industry as oil refining. Refiners will cut back on zero-margin gasoline production, which will reduce gasoline supplies, which will then drive gasoline prices higher to catch up with crude oil. Gas prices have only begun their march higher!

As a consumer, I’m sure this really irritates you. I don’t like it either. But as investors and speculators we must strive for total neutrality on all prices. We shouldn’t care one bit if a price is likely to rise or fall. Instead of wasting effort fretting, all our energy should go into figuring out how to game the trend for profits. The low-gasoline-relative-to-oil anomaly we see today will likely prove to be a great trading opportunity.


Anonymous said...

Are you suggesting it's time to go long on TSO, VLO, SUN, WNR ???

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