Expert: Paul Henneman - 9/14/2005

Question
Hi Paul Henneman

I would like to know it you think it is a good idea to invest in oil companies suh as Exxon or BP maybe. I believe that it will take a long time before fossile fuel can be replaced and therefore i think that oil prices will continue to rise. Do you agree on the fact that oil companys is a good investment?

I also consider placing money in United Defense, Boing or other military companys?

Best Regards, Soren

Answer
Thank you for your question! Yes it is likely that oil prices will continue to rise. The common analysis is that there is simply not enough production to keep up with the demand. Very rapidly rising demand in China and India will continue to increase this problem. It is very likely that prices will come down a bit after the gulf region in the US has recovered from the hurricane, and production there gets back up to full capacity. But and drop in oil priced due to this will be short term. Perhaps best to wait for this to occur, then jump in. Summer is also historically the time of year for highest prices, so prices may come down as we move to fall and winter as well.
I do strongly believe that you should be diversified. Things not expected can always happen, so do not put everything in oil. Eventually alternative energy sources may gain strength, but I agree with you that this may take 10 to 20 years to even begin to play a role.
Military companies are also a good bet, as there is no end in sight to terrorism and the need for their products. Interestingly, there is a new 'Homeland Security' index that has just been created by Cronus Capital Management. They track I believe around 70 companies that they feel summarize the main aspects of this industry. Richard Suttmeier can be emailed if you have more interest in this, his email is gmcreports@aol.com   He is the senior market analyst at a firm in New York, and is involved with the that new index.
I would suggest pursuing both so as not to be too exposed in a single industry. You may want to consider one or two more areas of interest as well.

I hope this helps! Please do not hesitate to follow up with me if I can be of any further assistance,

Sincerely,
Paul Henneman
ValuEngine, Inc.
President
www.valuEngine.com
www.VEInstitutional.com
www.VEReports.com