Post by Coast2Coast on Jan 7, 2015 23:18:12 GMT -6
Here is a place to share ideas on investing in markets. I am not an investment professional and do not claim any special expertise --other than my econ background has given me a penchant for perhaps filtering out the market "noise" generated by the pundits and pros in the media and focusing on big picture economic trends. For example, about five years ago, I posted on another board that I thought it was a great time to invest in stocks. I did not suggest which ones, it was just a simple big picture look at how the economy was going to be turning around. That has worked out pretty well.
I think we are on the verge of another huge opportunity coming soon. It is a similar theme...a bounceback.In this case, a bounceback in energy prices is coming. The fall in crude prices was not unexpected, because the great US shale oil boom has generated new supply at an amazing rate, while demand in Europe and China has decreased. It has been a steeper decline in a short time than most experts expected,but what goes down will come back up. Several things are happening in the industry now that will ultimately bring supply and demand back toward more normal levels of balance. Several small drillers with high production costs and debt loads will go under and their capacity will get bought at cheap prices by the big guys, but not all that capacity will remain online. The big guys have hedges in place that are cushioning them and their earnings for a few more months, but by Spring, as the hedges expire, I expect we will hear about more capacity being shuttered. I don't expect the Saudis will shut any of their capacity. Why should they, considering their cost is around $10/barrel. But American drillers with costs of $30-$60/barrel will have to shut down wells as the price falls below their costs.
As that happens, and supply levels fall, oil prices (and pump prices) will rise again. I have no idea how low prices will go before that or when they will turn. That depends on many factors. But it will happen and we should be prepared to strike.
There are many ways to play this expected move, but I suspect nobody on this site is a commodity trader. The simplest way is to buy a mutual fund of energy companies. My favorite is VGENX. It is a fund that owns Exxon, Chevron, Pioneer, Schlumberger, etc. Last June it was trading in the 70s per share. Today it is around 50, and could go lower. But once the supply/demand turn begins, I expect it to head back toward 70.
A move from 50-70 would be a 40% move. I don't know when we will act,but likely in the next six months. For now, we watch oil prices, pay attention to news about supply cuts and get ready to pounce. I am watching this daily and at some point, will pull the trigger.
Another suggestion...many people may not have investment accounts, but do have IRAs and 401ks. If you have a self directed IRA or 401k with a personal choice option, where you can select funds outside of what your company offers in the usual plan, consider moving some $$ into it so you can buy an energy fund like VGENX or a similar energy fund of oil company stocks.
It's not often in our lives we get a potential 40% move we can anticipate ahead of time and one that might take only several months to move that much. I think we are about to see one of those times.
I think we are on the verge of another huge opportunity coming soon. It is a similar theme...a bounceback.In this case, a bounceback in energy prices is coming. The fall in crude prices was not unexpected, because the great US shale oil boom has generated new supply at an amazing rate, while demand in Europe and China has decreased. It has been a steeper decline in a short time than most experts expected,but what goes down will come back up. Several things are happening in the industry now that will ultimately bring supply and demand back toward more normal levels of balance. Several small drillers with high production costs and debt loads will go under and their capacity will get bought at cheap prices by the big guys, but not all that capacity will remain online. The big guys have hedges in place that are cushioning them and their earnings for a few more months, but by Spring, as the hedges expire, I expect we will hear about more capacity being shuttered. I don't expect the Saudis will shut any of their capacity. Why should they, considering their cost is around $10/barrel. But American drillers with costs of $30-$60/barrel will have to shut down wells as the price falls below their costs.
As that happens, and supply levels fall, oil prices (and pump prices) will rise again. I have no idea how low prices will go before that or when they will turn. That depends on many factors. But it will happen and we should be prepared to strike.
There are many ways to play this expected move, but I suspect nobody on this site is a commodity trader. The simplest way is to buy a mutual fund of energy companies. My favorite is VGENX. It is a fund that owns Exxon, Chevron, Pioneer, Schlumberger, etc. Last June it was trading in the 70s per share. Today it is around 50, and could go lower. But once the supply/demand turn begins, I expect it to head back toward 70.
A move from 50-70 would be a 40% move. I don't know when we will act,but likely in the next six months. For now, we watch oil prices, pay attention to news about supply cuts and get ready to pounce. I am watching this daily and at some point, will pull the trigger.
Another suggestion...many people may not have investment accounts, but do have IRAs and 401ks. If you have a self directed IRA or 401k with a personal choice option, where you can select funds outside of what your company offers in the usual plan, consider moving some $$ into it so you can buy an energy fund like VGENX or a similar energy fund of oil company stocks.
It's not often in our lives we get a potential 40% move we can anticipate ahead of time and one that might take only several months to move that much. I think we are about to see one of those times.
