Kirk Spano was tabbed "The World's Next Great Investing Columnist" by MarketWatch of the Wall Street Journal network in 2011. He has written for Motley Fool, Seeking Alpha and been widely distributed by various newswires, brokerage feeds and on Morningstar. As one of the first to identify the developing resource boom in America, Kirk has been able to pass on stellar returns to his investors and subscribers. He has appeared on Fox Business and made regular appearances on the radio. Mr. Spano is the founder of Bluemound Asset Management a fee-only Registered Investment Advisor.
Special Note: "A Peak Oil Plateau Special Report: The Last Great Chance to Buy Oil & Gas Stocks" will be updated as soon as earnings are complete and I have reviewed the hedging and finances of the companies. I will be adding three or four new companies, as well as, possibly taking one off of our prior list. The working title for the new updated piece will is: The Last Great Chance to Buy Oil & Gas Stocks - The Dirty Bakers Dozen
This past week continued the volatility that we have been warning about and following. While Friday ended the week on a postive note, we are not sure how long that can last. As you can see on our webcast, the market remains under pressure despite some up days which are mixed in.
Energy remains a big story. We are seeing the early stages of some reversals in the stocks that have made the Fundamental Leaders and Emerging Leaders lists, however, there clearly could be one more shock down. If there is a blow-off bottom in coming weeks or months, it will be back up the truck time. As it stands, the weekly numbers have showed slight improvement and we may simply retest the December price bottoms. If you missed buying some of the companies on my lists in December, you will want to initiate positions on the retests.
The markets continue to exhibit volatility that hasn't been regularly present in a few years. While markets are not as volatile as 2011 yet, the end of QE in the U.S. and economic challenges around the globe signal that the easy to ride Fed reflation is over.
Algorithmically, we see clear signs that the market is in a topping process. This process has been going on since early summer of 2014 and is becoming more likely to indicate that we are seeing a major top being put in. There is also a possibility that we get a parabolic move upward if we see very positive economic news, further Fed stimulus or investor irrationality if their fear of missing the upside suddenly outweighs their fear of losing money on the downside.
Regardless of whether a final parabolic move upward in markets occurs or a new bear market begins sometime this year, we should be able to selectively navigate whichever occurs. Currently, we are cautiously buying some of the oversold assets in the market (rare as they are now) and simultaneously selling certain assets which have become overbought and lost their positive price momentum.
On June 5th in MarketWatch I suggested that a developing Peak Oil Plateau would lead to range bound oil and natural gas prices for a long time, with only occasional drops or spikes outside of that range. I also said that by the end of 2014 we would see oil prices drop substantially:
"I believe there is a high probability that we do move to the low end of the oil-price range later this year..."
Since then, the price of oil has not only dropped to the low end of the range, but it has embarked on one of it's rare collapses below its sustainable range. In early June, the price of Brent crude was about $108 per barrel. Today the price of Brent is hovering near $58 per barrel, far below the $80 to $120 range that I identified.
With oil and oil stocks crashing right now, our decision to be light oil stocks since summer time has proven to be very important. A month ago when I talked about asset allocation was also good for us, as hopefully everybody moved to at least 25% cash holdings. Now we need to focus on the dominoes that could still tumble with oil.
With the addition of some algorithmic analysis to our approach we can look for better entries. Subscribers will see on our current "much own" stocks update that only a few companies are good buys right now despite the lower prices from just a month ago.
In coming weeks and months, I believe it is very likely that we get financial crisis pricing on many of the oil & gas and oil & gas service stocks we have targeted.
On Thanksgiving, the news that I said would come to pass, came to pass. OPEC, the Organization of Petroleum Exporting Countries, agreed to not cut oil production. The result on Friday was a crash in oil prices and oil company stocks. The ongoing impact will be significant and lasting.