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Oil Stocks Vs Oil
posted Mar 10, 2005 at 10:52PM

Given how much time I spend looking at ratios I thought maybe it would be interesting to look at this ratio.

It is hard to believe that since 1999 oil stocks have been underperforming oil itself, but there you go.

Interpretation? Multi-year bearish divergence? Stocks are undervalued given the new reality in higher oil prices?

Actually I wouldn't read too much into it eihter way. I think this shows you have to watch it in these ratios when you have a large number being compared with a smaller one.

Another example would be the gold/oil ratio which a lot of gold bulls keep pointing to. Because you have an inherently large number (POG) being divided by a smaller one you can easily have a situation where both gold and oil are dropping even though the ratio itself is rising, and vica versa.

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