Here's my concern about the oil industry. Really big producer Russia and significant producers Iran, Venezuela and Iraq can't balance their budgets on low oil prices but they also can't cut back on production because they need cash. Saudi Arabia, another very large producer, is defending its market share and isn't unhappy to inflict pain on Russia, Iran and the fracking industry for different reasons but nonetheless they don't have a big incentive to cut back on production.
The US, another very large producer nowadays, has made significant capital investments that won't just get turned off. The projects that will get slowed down or turned off will have an impact years from now because the current price creates an incentive for some of the already large producers to keep producing in order to service their own national interests as well as debt .
I don't disagree with most of what's been said here- averaging in is far more reliable than trying to pick the bottom, there will be opportunities, some of the associated stocks that have been pulled down without a strong economic connection are probably already opportunities. I'm just not sure with the considerable economic AND importantly political headwinds, that its time yet to be committing additional capital to energy investments even on an averaging in basis.

Attended a beautiful Christmas dinner party last night at a local winery...

Ended up sitting next to a couple that came in from Texas, big fans of the winery and area. Each had retired from major global oil companies after 31 years in the biz. One oversaw development projects world wide. Another worked the oil futures trading deck.
Anyway, they inherited a ranch recently and are learning to herd cattle. We discussed the current rapid decline in oil prices and of course they took it in stride. "Oil's not going away." They believed the demand will continue to rise and this down turn will be rather short lived, perhaps a year or two.
"Have you every herded cattle?" one asked. "It just takes one cow to start running in any direction and all the rest follow... Oil pricing is a very emotional business."

In case someone gets the wrong idea on distributions, they are great for long term holding of funds. While the NAV drops you are getting additional shares as well. it is like building a foundation of sorts. In later years the power of those additional shares will have a significant role in the growth of your investment. The only downside is the taxes you have to pay but you still have the majority of the benefit.

DlphcOracl:
You mention CP. I own CNI and CP as two of my top investments and personally, I don't even think about them on a day-to-day basis.
If you asked me to mention stocks that I would feel comfortable holding for a few years, I could offer a lot of names. If you asked me names that I would feel comfortable holding for 5-10, there would be less. If you asked me for names that I can strongly imagine holding for 20-30+ years, it would be a short list and railroads would be at the top of it.
EPD (and ETE) I don't think about on a day-to-day and I just reinvest dividends (with the added 5% DRIP discount.)
CLR is really interesting, but I think my problem with this drop in oil is that it's effected things that I own beyond the oil-related (look at Ecolab/ECL, which is primarily a hygiene company, but because an aspect of their business is related to fracking, that's taken a hit. Ecolab's largest shareholder is Bill Gates and the company has raised the dividend I believe every year for something like nearly 30 years.
So, for me, it becomes difficult to add something like CLR. I say that now though, and maybe in a few days it winds up at a price I can't resist. Who knows.
LYB is something I've explored not much beyond the surface, but I think the first thing that I thought of was, "Well, isn't what they make their product from now cheaper?" I guess the issue becomes:
"LyondellBasell may be a producer of ethylene, but it has been one of the biggest beneficiaries of the U.S. shale revolution. It has converted much of its U.S. chemicals facilities to run on natural gas feedstock, specifically ethane, that is cheap and abundant thanks to new fracking techniques. That has given LyondellBasell and other U.S. chemicals producers like Westlake Chemical a huge advantage over foreign companies that use oil-based naphtha as a feedstock. Now that Saudi Arabia has cut prices for U.S. oil exports and Brent crude has hit a four-year low, the so-called ethane advantage has shrunk considerably."
http://www.forbes.com/sites/nathanvardi/2014/11/04/billionaire-len-blavatniks-lyondellbasell-trade-looks-a-little-less-great-after-oil-price-drop/?partner=yahootix
I think the LYB situation could certainly turn around within a reasonable time frame. The advantage that they have has shrunk, but the feedstock for the product they make is only now cheaper, so I suppose I'm questioning the decline in the stock, which seems overdone for the reason above.

Replies to linter, MikeM and Derf:
linter: When I bought those energy stocks in September it was for a ST to intermediate term "swing trade". I did not perceive that the energy stocks were in the midst of a bear market and I did not have any conviction that these were compelling stock values. Rather, I still thought the energy sector was in a bull market, as was/is the rest of the stock market, and that this was a correction that would quickly reverse itself. Wrong !!
My reason for putting 10% stocks underneath all of those positions once they had been completed is because I am, as most of you are, an amateur investor and I do not have inside knowledge or an "edge". It is a counter to my hubris that I "cannot possibly be wrong" and it gets me out of ST/IT trades when it becomes apparent that there is something else at work that I do not see or understand. That said, investing at current levels is an entirely different matter and whether I employ a stop is now stock and investment specific.
For example, Oasis Petroleum is a SC stock that has lost over 80% (yikes!!) of its value in six months and now has a price:book ratio of .66 and a PEG or .17. However, it is also has a VERY high debt level and I believe the steep selloff in this stock represents concerns about its solvency and profitability in the near future. I WILL place a 10% stop loss underneath this stock once I have finished averaging in because this is a highly speculative position. Conversely, Whiting Petroleum (WLL) has lost 70% in three months and has a price:book value of .66. However, it has a market cap of nearly 4 billion dollars and has been a very well managed company. Morningstar's energy analyst (and I always find M* to be overly conservative in its stock evaluations) believes in its most recent report of 12/02/2014 that the fair value of WLL based on its holdings is $84 per share. I will NOT put a stop under WLL because I do not foresee a situation where it could go to zero. I am prepared to ride this one out for 3-5 years. I feel similarly about investments in LYB, CP, and several of the high quality MLPs with high, safe dividends (WPZ, OKS, EPD, etc.)
MikeM: I agree with your points regarding usage of stops and hope I have clarified how I intend to use them this go-around in my reply to "linter". The majority of positions I am averaging into are stocks, ETFs (MLPI, PXI), and MLPs that I believe are high quality investments that are compelling LT holds and they will not have 10% stop-loss orders placed underneath them. My investing horizon for these positions is LT, i.e., 3-5 years. The few highly speculative "swing-for-the-fences" positions such as OAS will be stop-loss protected.
Derf: No one really knows where the price of WTI crude will bottom but one has to make an educated guess. Two of the most well-respected figures in the energy industry, both with many decades of experience and billions of dollars of skin in the game, are Boone Pickens and Harold Hamm (CEO of Continental Resources/CLR) and both thought it would bottom at around $60. Clearly, both have been proven wrong. CNBC's Dennis Gartman and the staff writer for Barron's (Gene Epstein) believe it could settle at $30-$40 per barrel. I'm placing my bets with Pickens and Hamm and investing accordingly.
One last word to frame this discussion and put it in perspective - these investments in beaten down energy stocks and peripheral stocks dragged down with them (chemical & railroad stocks), ETFs and MLPs will, in total, make up no more than 10% of my entire portfolio. The vast majority of my portfolio is held in ETFs and MFs that I do not trade in and out of. This is Madd Money, i.e. a cash position of 10% to 15% that I intermittently hold for employing into unforeseen investment opportunities. As stated above, every year or two one of these opportunities comes out of nowhere. It is an attempt to "juice" my overall portfolio. Any and all comments and criticisms are welcomed. This is still a learning experience for me, as well.

Really good thread! Thanks everybody for sharing. Thanks to DlphcOracl for starting. Enjoyed reading all points.
What strikes me is how fast it dropped. During the 1980 oil bust, which turned Houston into a ghost town, I believe the 70% decline took six years ($33/barrel in 1980 to $10 in 1986) ... this time we're almost there in just three months!
Here's a recent article related to Scott's energy debt posts...from the Houston Chronicle no less:
Memories of '80s oil bust keep bank regulators vigilant

hank -
1. I was not implying that investing under these circumstances is a "no-brainer" - it never is. However, I AM saying that investing in sound, well-managed companies at the present time greatly shifts the odds in one's favor. That is all one can do, especially in buying individual stocks. MFs and ETFs are, to some extent, a different story.
2. Regarding Bill Gross: I have simply tuned him and Mohammed El-Erian out. They talk too much and say too little. I have never heard anything from either one that was investable or made any money for me.
3. Regarding my post of September 23 - I was flat out wrong and I lost money on those investments. As posted, I did indeed proceed to average into several energy stocks and complete those positions. However, ALL of them got stopped out when then hit -10% of my average NAV after I had completed those positions. I never dreamed that:
a. the price of WTI crude would drop this far this fast and certainly did not guess that it would drop below $60. I believe the gurus that believe it may fall to $50-$51 are credible whereas those calling for $40 oil are not.
b. Whiting Petroleum (WLL) would lose 70% of its value in three months and now trade at a price:book ratio of 0.8 or that CLR would lose 60% of its value.
c. Well diversified stocks with peripheral association with oil and energy would also sell off as much as they have, e.g. WLK, LYB, GBX, CP, TRN (although TRN has other issues as well). I cannot believe that buying a large-cap leader such as LYB with a dividend yield of 3.8% and price:book of 3.8 when it has lost 40% in three months will not be profitable in 2-3 years.
One final point: I share your disdain for the "don't catch a falling knife", i.e., don't invest as stocks are rapidly losing value, canard. It is the antithesis of "buy low, sell high" and it make little investing sense. If one uses it to mean "don't back up the truck and buy aggressively" in the midst of a steep decline, I agree. If it is used to say "don't invest when the stock market or a stock is going down, I disagree. At some point, one has to use his/her own best judgment and decide when a stock, MF or ETF has reached a value that makes it worth owning if one has a time horizon of years, not months, and slowly average into a position. It isn't foolproof but investing never is.

Hank:
1. Bill Gross has been "right" about very little for several years. Not the guru I would take my investing lead from.
2. A 50% drop in NAV is not important in and of itself. However, when it results in a well-managed stock with clearly defined assets trading at or below its book value, it's called an "investing opportunity". If you do not invest under these circumstances, then "when" ??
3. Do not depend upon an MF manager to make the difficult investment decisions for you. Very few have the cajones to invest when good stocks are on sale and are no more likely to do so than you are. Look above at my reply to Derf and see how most MFs did in 2009. Whether or not they beat their bogey, i.e., their sector peer group average, in 2009 will separate the MF manager wheat from the chaff.

Hmm ... Very difficult to pull off. Markets can remain irrational longer than most of us can remain solvent. The time needed for a bounce-back can be painfully long as those of us who thought Japan looked cheap in 1997 learned the hard way. It looked even cheaper a decade later. Percentages are funny things. Oil & some producers have lost 50 percent this year. That might imply some kind of floor? Nope. They can still drop another 30, 40, or 50 percent next year if they want to.
It's very hard to time incremental purchases going down. Tendancy is to buy too early, than to throw good money after bad, than to get frustrated and bail at a loss before rewards are realized.
However, rewards can be phenomenal if one gets it right.
Delphi - I've been doing what you recommend with the "play money" segment of my portfolio (less than 30% of total assets). And it hurts. I believe that 3 or 4 years from now I'll be pleased with the results. However, that's not for certain. Get into a serious deflationary spiral and all bets are off.

Reply to Derf:
1. I cannot say or recommend what you should do with regard to buying individual stocks because I do not know how it fits in with your current investment portfolio and temperament. You certainly can purchase or average into some of the ETFs or ETNs that have been beaten down and increase your exposure to the energy sector.
2. Regarding your MF managers: Your MF managers SHOULD be looking for bargains and unjustly beaten down stocks and scaling into them . However, most will act as if they are "deer caught in the headlights" and do nothing until well after the fact because they are seeking a false "margin of safety". AFTER these stocks have bounced back and gained 25% to 50% in a few months they will THEN have their security blankets and begin nibbling. How can you tell which of your MFs have managers that are investors or deer?
Very simple. Take each MF you have and look it up on Morningstar (M*). Click on "Performance" and then click on "Expanded View". This will show your fund's performance year-by-year for the past ten years. Now, go to the year 2009, which is when the bear market ended and the market reversed violently to the upside, and see how your MF did compared to its peers, i.e., compared to the average for its M* sector. If your fund did not outperform its peers in 2009 then its manager was asleep at the switch or frozen with fear and did not buy stocks when they were extreme bargains.
As an example: WSCVX (Walthausen SC Value fund) returned 42.39% in 2009 compared to the M* SCV average of 31.32% in 2009. Clearly, Walthausen scooped up value stocks and the fund lived up to its name. OAKLX (Oakmark Select) is another example of a fund whose manager, Bill Nygren, bought aggressively at the bottom, returning 52.46% versus the LC blend average of 24.29% for that year.

A 50% decline in the price of WTI crude over the past three months without any fundamental change from what has/had occurred throughout the first half of the year, and the extreme selloffs in many energy stocks and other stocks with peripheral association to oil is a gift from the gods. In any given 1-2 year period there is a stock market black swan event that is totally unexpected and unrelated to the fundamentals. Rather, it is an emotion-driven event that takes on a life of its own, overshooting to the upside or downside. This is an extraordinary investing opportunity and you should have already made your Xmas shopping list and be averaging into the best of the stocks and ETFs that have been decimated.
Examples:
1. Mid and small cap energy stocks: WLL, OAS, CXO, CLR. These are NOT stocks with extraordinary debt or leverage within their sector and they have declined between 50% to 70% in just 3-4 months. WLL already trades well below book value.
2. ETFs: energy exploration & production (PXE, PXI).
MLPs (MLPI, MLPX)
3. MLPs: EPD, MMP, PAA, WPZ. These are companies that transport oil or natural gas and are involved in various aspects of the energy infrastructure. A high percentage of their revenues come from long-term, fee-based contracts with built-in price escalators. They will get paid regardless of the price of WTI crude and the energy demand in the US shows little sign of abating. The U.S. is not in a recession nor does anyone really see one on the horizon based upon recent employment data, retail sales figures, corporate profits, etc., These stocks have sold off about 20% in three months and they pay dividends between 4% to 8% (WPZ).
4. GLOG (GasLog): Off nearly 50% from its high this year, price:book ratio of 1.5 and a nearly 3% dividend. This stock is involved in liquid natural gas cargo transport and the price of WTI crude should not logically result in a loss of 50% NAV. Do you really think the demand for inexpensive natural gas by emerging market countries and European countries that are totally dependent upon imports for their energy needs will evaporate for the remainder of the decade??
5. Transports: Specifically, the railroad stocks: GBX, TRN, CP, CNI. Railroad stocks with ANY exposure to transport of oil have also been dragged down, even if oil transport makes up a small fraction of their total business.
6. Chemical stocks: WLK, LYB. Both stocks are involved in oil refining and production of gasoline additives although this is not a majority of their businesses. Both have lost 45% in the past three months and LYB sports a dividend approaching 4%.
I could go on but the point is obvious: if you are not slowly buying ETFs and top quality stocks that are now on sale by averaging in you need to ask yourself what you are waiting for. Are you the same "investor(s)" that would not buy stocks or ETFs in March 2009 after the S&P 500 had lost 55% of its value because you were waiting for it to decline another 20% ?? Because the CNBC "experts" said the S&P 500 was going to decline to 400 or 500 and the world's financial system was going to collapse and vaporize??
FWIW, I am slowly buying into many of the above names with the understanding and expectation that my initial positions will lose between 5% to 25% over the next month or two. However, that is why one slowly scales into a position. When the turn does come it will literally happen overnight and these stocks will gain 5% to 10% a day for several consecutive days and then you will say that you've missed the turn and it is too late to get in.
These are not dot.com stocks or biotech stocks with promising Phase I or Phase II trials for a single drug. These are established, well run businesses with very real assets and earnings. You will not catch the precise bottom but 2 or 3 years from now these will be very profitable investments and you will ask yourself why you missed this investing opportunity.

Here is an update about the recent performance of ICMUX. Per M*, its performance since 8/31/14 and the performance of some other funds mentioned in this thread are as follows:
ICMUX: -4.4%
RPHYX: +0.3%
RSIVX: -0.8%
DLINX: -0.6%
M* High Yield Bond Index: -4.4%
Per M*, ICMUX has an effective duration of only 1.19 years and has 34% allocated to cash. But, its loss since 8/31/14 is as great at M*'s high yield bond index!
Looking at their holdings, there is a substantial allocation to the energy sector including the top two holdings. This probably explains the size of the loss.
Perhaps this fund will rebound quickly and demonstrate the difference between volatility and risk. Allocating some of their cash at the right time could help.
But, recent performance suggests ICMUX is a market cycle fund and not a fund for someone looking for a smooth ride and an easy exit if the need might arise to sell shares in a relatively short period of time.

FYI:
Regards,
Ted
WSJ Slant: http://www.wsj.com/articles/u-s-stock-futures-drop-along-with-oil-prices-1418390833
Bloomberg Slant: http://www.bloomberg.com/news/print/2014-12-12/u-s-index-futures-fall-after-s-p-500-rebound-as-oil-outlook-cut.html
Reuters Slant: http://www.reuters.com/assets/print?aid=USKBN0JP1DA20141212
MarketWatch Slant: http://www.marketwatch.com/story/us-stocks-end-with-biggest-weekly-decline-in-years-2014-12-12
Markets At A Glance: http://markets.wsj.com/us
Sector Tracker: http://www.sectorspdr.com/sectorspdr/tools/sector-tracker

I should take a closer look at Fidelity equity funds - I'd pretty much given up on them for several years (with exceptions like FLPSX). FSDIX looks interesting, though I've always had problems fitting hybrid funds into my portfolio.
I'm not clear on the point of FGRTX, for a couple of reasons. First, why single out these companies - can you find a large cap fund that doesn't already have Apple? Why overweight megacaps?
Second, megacaps would appear to be the portion of the market least likely to benefit from active management. One can get a pure megacap passive fund like OEF (iShares S&P 100), or the more concentrated, and even cheaper, BRLIX (Bridgeway Blue Chip 35 Index)?
Regarding FLPSX ... about a decade ago, I listened to a M* analyst talk about Tillinghast, describing how he could talk intelligently about every one of the hundreds of stocks in the portfolio. He added that this skill was well beyond what he'd seen in any other manager. The comments were in response to the usual question of how big can the fund get. It seems to keep going strong.
I ascribe its underperformance in the past few years to the large percentage of foreign holdings in its portfolio. I feel that in the long run, a large percentage of foreign stocks is a plus. Though I wonder why M* doesn't reclassify the fund as a world stock fund, as it did for MQIFX Mutual Quest (formerly Mutual Qualified).
Finally, as a short term play on healthcare, if one wants to make a political wager, it might make sense to pick up FSMEX (medical supply and equipment). If there's any part of ACA likely to be jettisoned, it's the excise tax on medical devices. I don't know how much of an impact that would have, I'm bad with sectors in general, and I don't do short term trading. So consider the source of that suggestion.

Hi BobC and All Contributors,
Thank you all for your perceptive contributions. BobC, you helped focus my attention and I agree with many of your keen and penetrating insights. You are spot on-target.
Jeffrey Gundlach has certainly prospered from a long and controversial career that included his heated and forced departure from TCW. His continued success story in the bond market is undeniable. He is definitely a serious forecaster who deserves respect.
Here is a Link that provides viewgraphs from his 2014 forward looking expectations:
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/01/Gundlah Year of the Horse.pdf
According to Advisor Perspectives, his 2013 projections were not all that solid. Nobody has a perfect record in the investment business. Even some of his 2014 predictions seem to be heading, perhaps momentarily, in the wrong direction. According to some folks in the industry, Gundlach is an arrogant, overly confident guru; that’s a necessary characteristic. It’s very acceptable given his superior track performance, but buyer beware.
Here is a Link to Advisor Perspectives’ interpretation of Gundlach’s 2014 projections:
http://www.advisorperspectives.com/newsletters14/Gundlachs_Forecast_for_2014.php
Regardless of his many successes and a few failures, I remain hugely suspicious of any long-term economic forecasts, especially from the macroeconomic community. These have a sad historical accuracy record. The odds deteriorate with time.
All of professor Phil Tetlock’s numerous forecaster accuracy studies consistently demonstrate the futility of these exercises. It is a daunting challenge to forecast even the next quarter’s outcome, and a near impossibility to look 10 years into the future. Accuracy degrades rapidly over time, especially among the economists cohort who seem to be very fragile in the forecasting arena. According to studies that date back into the 1930s, forecasters can’t forecast.
Like Catch22, I too like MFO poster bflotomny’s original balanced mutual fund portfolio. Both the Vanguard Wellington and Wellesley funds have proven performance records. I have held both these Vanguard products in my portfolio for over 20 years. I also have held a third Balance fund, Dodge and Cox Balance mutual fund, for over 2 decades. This formidable triad gives me geographic management thinking diversification.
Thanks again for an excellent set of submittals. This includes everyone. I concur that no immediate action is necessary.
Best Regards.

Currently --- USA, China, Japan, Europe are all worried about and trying to avoid deflation.
If interest rates rise there will be external pressure for the USA to institute a VAT, slowing economic growth and lowering inflation - look at Europe and Japan.
Longer term --- the world population is going from 7B in 2000 to 10B in 2050 - that is a 42.8% increase. The world went from 1B in 1800 to 10B in 250 years. USA, China, Japan, Europe populations are ageing during this time while the growth in population is in 3rd world countries. The effects are wide ranging - research it.
I know I'm going against the trend but I would be more concerned about deflation.

That's a fascinating analysis, Dex, especially with your added comments. It will be very interesting to see what types of response this gets from our regular contributors.
I say that because over the years, when I've posted articles & links dealing with evolving world financial & political situations, as opposed to articles directly involving right-this very-minute investing, there has been almost no interest at all. It seems to me that some of our most successful investors, such as Ted just to name one, pay absolutely no attention to this type of "background info", and sometimes run circles around me, maybe because I get too cautious. Drives me nuts, to tell you the truth.

FYI: Though large-cap stock mutual funds are outperforming this year, they have trailed their small- and midcap counterparts the past 15 years.
A $10,000 investment in the average big-cap fund on Sept. 30, 1999, would have grown to $19,404. The same investment would have grown to $39,477 in midcap funds, $42,472 in small-cap funds and $21,566 in the S&P 500, according to Morningstar Inc. data.
Regards,
Ted
http://license.icopyright.net/user/viewFreeUse.act?fuid=MTg3MzkwOTg=
Enlarged Graphic: http://news.investors.com/photopopup.aspx?path=WEBlv120914.gif&docId=729670&xmpSource=&width=1000&height=1152&caption=&id=729671

i switched a bunch of POAGX for PRHSX a week or two ago and am glad i did, so far. actually wish i'd switched it all, so far. but it does worry me that the health-care chorus is all singing a single note. then again, i thought the same thing one year ago and two years ago, when i first started buying PRHSX. at some point, the sector does have to go belly up for a while, right? the fact that, near as i can tell, it's *never* really happened, doesn't mean it won't, right? (p.s., like Kevin, I too have been buying PQTIX, hoping that it'll provide some cover when the doody hits the fan.)

Howdy @JohnChisum
We've held FRIFX for several years; a conservative fund, equity/bond mix. A farily smooth and tame fund by normal real estate fund standards.
But, will remain with current healthcare holdings and keep an eye towards the energy related area.
You got through the storm okay, yes?
Catch