Sometimes it's a question of, we don't know what's bullish or bearish. For example, if someone decides to buy a ton of stock back at high prices and then, when the stock gets lower, stops buying, is that bullish or bearish?
If a company buys another company to take advantage of the decline in the second company's assets and then decides much further down that the assets may be worth less than they thought because the commodity they make isn't as valuable as it was, is that bullish or bearish?
I am talking about Exxon (XOM) and Royal Dutch Shell (RDS.A, RDS.B), both of which seem to have gotten this entire oil downturn wrong. Exxon had been the most aggressive buyer of its stock for ages, but now that the stock has been clobbered, down 25 points from the high, it announces it is cutting its buyback in half. Oil has now been falling for a full year, and this is when they realize they have been buying too high?
To me, that would make me want to do the opposite.
Back in April, Royal Dutch announced that $70 billion BG Group (BRGXF) buy, an acquisition that is primarily about deep water Brazilian properties, the kind that are simply uneconomic at these prices.
Yesterday, it announced it is scaling back billions of dollars of the kinds of projects you need to make BG worthwhile. I could argue they could have gotten this sucker for half of what they paid, if they have waited.
So now that these two firms have turned officially bearish, now after enormous declines, we should get really negative?
Yet that's what it looks like is happening.
It's almost as if these giant companies are shocked and dazed.
I continue to think that oil is putting in a bottom, where it put one in before or slightly higher.
I will take my cue from the supply and demand numbers, which I think are coming into balance, the way that David Demshur from Core Labs (CLB) said earlier this week on Mad Money.
But today is the day that everyone's taking his cue from Exxon.
Good luck with that.
