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Wow, this is a great conversation. Thanks for starting it anuragupta.

I guess that it depends upon what one's definition of a bubble is. For example, Barron's calls oil a bubble on the cover this week, but when one reads the actual article it states that oil may fall back to $100 and then eventually return to a gradual upward path. To me, staying in triple digits is not the popping of a bubble. The companies that I have invested in in this area would still do phenomenally well with $100 oil.

To me, while the charts look cool when they are superimposed on each other, the comparisons with the tech bubble and the NASDAQ that we have been seeing a lot lately are way off base. On one hand we were talking about companies that had absolutely no, or little earnings such as stupid sites like Dr. that were bid up to outrageous prices. Oil on the other hand we have a resource that there is a finite supply of that we use in every single aspect of our daily lives.

Not only do I believe that high oil and gas prices are here to stay, but I believe that the stocks of oil companies have a lot of catching up to do. Evidence that oil stocks will eventually rise is apparent in the following chart which compares the price of things like the S&P Global Energy ETF (IXC) to the three month moving average price of light, sweet crude oil.

The ETF's holdings, including large caps such as BP (BP), Chevron (CVX), ConocoPhillips (CPO), and Schlumberger (SLB), have some catching up to do if oil stays at its current level. The last time the IXC was this cheap relative to the price of oil was March 2003. Right after that the price of oil dropped by over 30% and the price of the fund actually still increased by 6%.

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