Silence Of The Bulls

Silence of the bulls?

Not a single share of ERHE, the newly minted symbol for ERHC Energy, was sold between 12:30 and 2:40pm EST today, and volume stood still for more than two hours at 209,810, the lowest level in months. At 2:40, another 1,000 shares traded.
As of 3:15pm EST nothing else had moved.

What can investors learn from this experience? Here are my observations.

• Since volatility and volume are critical to day traders, very few are trading ERHE today.
  
  
• Non-day-trading Investors who regularly post on the Raging Bull ERHC message board do not account for much of the daily trading - possibly less than 25 percent of it, collectively.
  
  
• Anyone who had a "naked" short position in this stock is in a world of hurt, since they have no certificates to present to the stock transfer agent for new ones with our new CUSIP and the new ERHC Energy name.

I think we are in for a brief period of retrenchment, and then a time of steady growth leading up to the awards. If the conduct of the first round was any indication, it will take the Nigeria-Sao Tome and Principe Joint Development Authority about six months to sort out all of the bids and make their choice of operators and participants. As much as all of us had hoped for awards very soon - and they still could, surely - the JDA's track record does not encourage that hope. Then again, word of the awards may have leaked and smart investors may simply be trying to gain an inside track on the winners.

That longer-term timing, though, in addition to destroying the reputation of the awards-makers, would be a problem for any of the companies that want to bid on blocks in the Nigeran Exclusive Economic Zone, or on other blocks that are up for auction in July. But Nigeria and Sao Tome are unlikely to rush such a potentially profitable set of contracts through when oil price volatility is growing and dire predictions of shortages become more urgent.

While the prospect of a four-to-six month further delay may cause some investors to sell, that would probably be a mistake. Unless Osama bin Laden is captured, and the insurgency in Iraq and Afghanistan ends, and the Iranian and North Korean nuclear programs are abandoned, and the Israeli-Palestinian truce holds, and no new technology makes oil redundant, the price of oil is going to rise higher as Summer approaches.

The idea of $65-a-barrel crude is not the fantasy it once seemed. Awards after a substantial price rise could mean more money for ERHE shares than we ever dreamed possible.

Just the same, those who trade with a limited amount of cash might decide to jump out here, invest elsewhere until awards seem imminent (and don't they always?), and then jump back in. If that creates a tax loss, the deduction could be mighty useful if price hikes, awards and big profits for investors come about.