Everybody Hates Ya' for Hating Oil?

I sure didn't win any popularity contests today when I went and shot my mouth off calling a top in oil today, did I? People LOVE their peak oil theses!

We pretty much got a consensus of disagreement with me about there being any chance of a top in oil ever in our lifetimes. Think about that. I'm not even exaggerating that the consensus seems to think that. "EVER".

At some point, this consensus thinking and all the capital flooding into this increasingly so-called "energy crisis" along with all the pullback from ever relatively poorer consumer around the world as inflation creeps is exactly what puts tops in to cycles. Is this THE top? I think it could be, sure. Regardless, I think it's a good risk/reward trading set up to start building shorts in oil into the $120s.

The overwhelming consensus and the near-vitriolic response here and in my emails to my bearish oil thesis here remind me of two examples of reversal calls that I got right (I remember them, partly because we do a good job of selecting our memory -- I've got plenty of reversal calls I got wrong too, I'm sure...at any rate, I remember them because they were the two most important trading/investment decisions of my adult life; I nailed a real estate investment/trade during college, turning a disastrous loss of my parents into what's now 500 acres of rocky rough ranch land across the street from our little farmhouse that my parents reminded me of this recent trip home -- will explain some lessons from it soon)).

Here's what I wrote about Microsoft after I basically bet my firm loading up on calls and common and shorting puts in Softee back in May 2006. The company had just told Wall Street it was gonna have to spend a ton to stay up with Google and that Vista was gonna be a few months late. I wrote and talked about it til I was in blue in the face and I was argued and bashed in my blogs comments section, in emails, and on the Net.

Here's what I wrote back at the time:

Microsoft Is An Investment, Not A Trade

By Cody Willard
RealMoney.com Contributor
5/4/2006 12:55 PM EDT
Click here for more stories by Cody Willard

I've made it clear that I'm not in Microsoft for a trade, but for an investment over the next two or three years. Somehow I think the major shareholder base isn't going to consist of Legg Mason Capital Research and Fidelity at the end of 2007 or 2008.

As James said earlier this week on a different topic: Men make plans and God laughs.

It's a long, long way to the Vista roll out, and until the dynamics of the economy, the marketplace acceptance, and who knows what else make Microsoft's earnings potential over the next two years clearer, there's no reason to pretend to know how much we're paying for those unknowable earnings.

What I do know is this: I am paying about 8 times cash flow for this stock six months before a major new initiative with 90% plus gross margins hits a (still) healthy global economy. Yet I am hearing about how stupid I am from contributors (Yes, Alan, I can do high school math. I even use calculus when I evaluate stocks and markets -- remember when everyone was talking about how the market had to top because the growth of the growth rate out of the recovery was slowing?) and emailers and blog commenters and friends and family.

If there's one thing I know for sure, it's that my vision of Microsoft's fundamentals and stock price isn't going to be entirely accurate. But I do remember how much everyone beat the hell outta me when I was buying Apple at about $7 a share and explained at the time that:

"Now, we've been buying Apple and Apple calls when it was getting crushed off the Universal Music purchase rumors. And I like the valuation on this stock and the fact that every investor and trader to whom I mention that I own it says "What?! Why?!"

Yes, I'm very, very long Microsoft right now.

And I know that I'm about to hear and read: What?! Why?!

Now, let's be very clear about a couple important things here when it comes to my conviction and even credibility on making reversal calls such as I made in those two tech stocks in the past vs. the one I'm making in oil today --

1. I know tech...inside and out. Companies, margins, strategies, histories, order flow, supply chains, important metrics and trends to track, catalysts for the stocks and for specific technologies, etc. I've obsessed over this stuff and worked 80 hour weeks for many years and have a broad and deep base of knowledge. I have a broad knowledge of oil and commodities, but I ain't no T Boone or Jim Rogers. (Not yet at least!)

2. I'm now a pundit, not a trader/money manager. In the end, I've got nothing but ego on the line with this call, as it's black and white, but it's not on my P&L (profit and loss). I've said it many times since I transitioned from omniprescent-knot-in-the-gut money manager to trying-to-be-just-be-cool TV head and it's simply true: It's easier to be bullish than long (or in this case, it's easier to be bearish than short oil).

PS. Ever watch those sit coms and bad 80s movies that have flashbacks inside of flashbacks and sometimes you can't remember or even tell which version of the timeline you've flashed back to? I sorta did that in this post, huh? Off to pick up some food for dinner. See you tomorrow.