The stock market and the oil market both seem to engender feelings much like summer vacation time when I was a kid.  Kinda boring, not much happening, a time to wander around, allow your attention dwell on whatever news of the day happens to come along and rest your mind before getting back to the “real world” some time around Labor Day.   So we can be distracted by Gov. Sanford’s bazaar behavior, the political drama of health care reform, Berlesconi and his babes, or Wimbledon - all of which are …

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In the conclusions to my latest newsletter I noted that, “Nearly every analyst is saying the market has come too far too fast and needs a pullback.  Great, let’s have one.”  Today I want to consider the pullback scenario further.  While it’s true that when “nearly every analyst” says something that thing is probably wrong, still  I think it might be reasonable for investors to take steps to protect the portfolio gains of the past couple of months in preparation for a potentially serious pullback.   Let’s hope that it …

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There is reportedly $4 trillion parked in U.S money market funds and other cash equivalents getting a return of approximately zero.   That’s a large cash allocation.  Breaking even seemed great a few months ago when most investors were being crushed by falling equity prices.  But now pessimism is waning and the last couple of months’ returns have been record-setting.  So cash is now starting to feel under-appreciated, pun intended.  One principle of investing always holds true:  funds must land somewhere.   So cash funds will either be re-invested where they …

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Oil and Stocks Advance Further   Oil and stocks seem to have bottomed as I suggested last month.  Since that March 16th post, stocks are up another 8%, a scorchingly hot run on an annualized basis.  Since March 6th the S&P is up over 21%.   Meanwhile the price of oil has risen almost 35% since February 18th, not quite two months ago. More Gains to Come I continue to expect further gains for both stocks and oil - and eventually for natural gas - but each is a different …

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Are stocks and oil bottoming?

Was last Tuesday’s 350-point rally the beginning of the end of the bear market or just a false “bear trap?”  And a related question: “Did oil bottom at $33 and will it get re-tested?”  Let’s see what we know.

Some things we know

Sometimes the objective observable facts can yield fairly clear conclusions.  Usually that’s not the case.  Usually you can use the available facts to make a decent argument in either direction.  But sometimes the facts seem fairly clear.

For example, there should have been clarity about being …

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Our current investment trauma marks the end of an era of excesses in credit and real estate markets, of course.  But it also denotes that the United States is undergoing a far more general and significant transition - not only to a new government with a radically different agenda, but more lastingly into a whole new climate for investments. 

Gone is the era of wind-to-the-back investing powered since 1982 by continually lower interest rates and the virtuous influence of the baby boomer demographic bulge working its way through the U.S. economy …

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As the global economy heads into terra incognita and the stock market tries to prove it has seen the worst my thoughts, for whatever they are worth, are: 1. Some economic observers such as John Thane, the CEO of Merrill Lynch, and JC Penney’s CEO Mike Ullman are saying the current economy is comparable with the Great Depression.   We need fiscal stimulus (since we’re nearly out of gas in terms of monitory stimulation potential).  How much?  If we’re going into a depression the quantity of fiscal stimulus needed …

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Stocks are clearly in panic mode; prices no longer correlate remotely with valuations.  My son asks me as the market tanks another 500 points who is buying.  Someone has to be buying. It’s a brilliant question.  I suppose the answer is that people who think the price being offered discounts all the risks of continued panic are buying.  So the price must be dramatically lower - that’s the only price able to find a buyer. 

What started the stock market tanking is the global credit market chaos about which we seem …

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Rough Seas This is just simply tough, this business of unwinding the radically leveraged bets of unregulated financial institutions - investments banks and hedge funds - and the unregulated bets of radically leveraged institutions - banks, Freddie, Fanny.  Bear may be followed  by Lehman.  Now hedge funds are liquidating and dropping like pop-ups just past the infield as their investors pass the threshold of acceptable pain and call back what’s left of their funds.  In the wake of hedge funds’ liquidating sales the real worth of great companies like …

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The economy, the stock market, and our understanding of the future direction for energy and transportation may all be on the brink of major changes .  This letter will open a discussion of these ideas. 

A Very Tough Month

Before turning to the future, I must confess that the immediate past month was  most painful for the EIS portfolio.   Oil prices hit a violent downdraft in July, which especially impacted my “options on futures” strategy.  It declined in value by about 33%.  Since the purpose of these options is to provide portfolio …

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Tsunami Investing ….

      Why Are Oil Prices Rising?  “The Answer” Comes into Focus

June was a good month for energy stocks and for the EIS portfolio but the broad market tanked.  The impact of high energy prices  on both inflation and consumer discretionary spending is being reflected in stock prices.  Energy pressures present a special risk to economic stability by coming on top of the twin collapses in the credit and real estate markets.

So far Mr. Market seems able to distinguish between the very healthy energy sector and the tenuous economy.  …

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Whither the price of oil?

Peak Oil may be in the future but Peak Oil Awareness has arrived.  I expect Time and Newsweek cover articles on Peak Oil any week now marking the official top in oil awareness.  It has already made the covers of The Economist and Business Week, the leading indicators for magazine covers.

When WTI hit an intraday high over $135 a barrel everyone on the planet not personally involved in an earthquake, cyclone or primary election paid full attention.   Apparently, this price level is high enough for a significant …

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  Crunch Time     Time for Natural Gas         Current Oil Outlook             It IS the dollar! First the April numbers. The EIS portfolio was up 11% for the month, about the same amount as the oil and services indexes, a bit better than the S&P. Year to date being up 8% is good relative performance. About 3% of it was due to the options on futures strategy. I added an option on some late 2011 natural gas futures contracts. I also disposed of most …

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Much of this letter is about the economy and the stock market because both were front page news for much of the past month. Oil is not much in focus for the investing public. Oil has tended to rise in price when the focus is elsewhere.

Macro Economy

There is little question that the U.S. economy is falling into the pooper. It is going down with the consumer and with the price of her home. It won’t be saved by any bailout that has or will be passed …

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2008 Thus Far: A Preview of Coming Attractions

My concern has been that at some point shortages of oil will cause a falling-stocks, rising-oil phenomenon that will crush my oil related stocks along with the whole market. 2008 has started like that. Oil was up 6.34% as of 2/29 (per the ETF symbol OIL) but stocks were down 8.5% (in terms of the S&P 500 ETF symbol SPY). For oil-related stocks, the falling stock market trumped the rising oil market, as I have expected. IYE, a broad-based oil-stock ETF, was down …

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