Obviously, I couldn’t know about the Hamas sneak attack on Israel Saturday when I gave you my alert to buy some energy stocks last Friday.
If you did buy some energy on Friday, great. But whether you did or you didn’t, I’m going to switch gears for the time being — the horrific ‘success’ of the Hamas invasion has me incredibly disturbed and rethinking the world, our markets and our investments. The following ‘ephiphany’ on global geopolitics may be short lived, but right now, it’s what I’m wrestling with. Take it for what it’s worth – the insights of a horrified oil trader in the wake of 1200 dead Israeli innocents.
If you know me, you know I generally like to be buying when the ‘crowd’ is selling, and selling when the hordes are most enthusiastically buying.
It is almost always during those times that the best opportunities can be had. Buffett may have said it best, but he certainly did not say it first: “be fearful when others are greedy and be greedy only when others are fearful.” It may be an old saw, but guess what? It’s true.
It is with a different energy investment than those we have be concentrating on where I find most investors overly fearful right now.
I’ll reveal that sub-sector to you at the end of this letter.
But first, a little reconnaissance on our beloved oil stocks: No, the latest Israeli war on Gaza and Hamas is not likely to generate a wide-spread conflict that will send oil significantly higher. Hamas embarks upon these terrorist, aggressive operations every few years to maintain their political grip in Gaza; they certainly don’t expect to conquer Israel and also fully expect and accept for their people the inevitable, swift and hard Israeli retaliation soon to come. Political support and Arab sympathy for these attacks could be their only logical motivation, and it’s horrifyingly pitiful – not only for those slaughtered Israelis, but also for the thousands of Palestinian civilians about to get unavoidably caught in the coming crossfire.
But oil supplies aren’t challenged in either Israel or their surrounding areas and Iran’s oil supply is currently well closeted from new US sanctions despite their financial support of Hamas, unless they choose to do something really stupid here with Hezbollah. The Saudis, for their part, have openly been courting the Biden administration (or is it the other way around?) for a Trump-like transactional arrangement of arms sales in exchange for a relaxation of oil production cuts in the coming election year as well as preparing to ink the Abraham accords defining recognition with Israel. With the looming MidEast conflict about to widen though, the Biden administration is going to need something to counteract high gas prices in the summer of 2024 if they want to get re-elected. In that, the Saudis hold the key of ready supply – and I predict Biden will surely give them the arms locker door at the appropriate time to open it with.
It seems the terrible ghost of Bismarck has returned: Biden has become ‘Clinton-esque’ in his realpolitik in recent weeks, even before this Hamas massacre, previously cozying up to the Iranians in search of more barrels and co-opting parts of the Trump border wall strategy to quell immigration discord. Whatever it might take to get re-elected (short of trying to overturn results through fraud and violence), it seems Biden is now prepared to do it – even if that means taking a little bit of policy from Trump himself, much like Clinton co-opted many of Newt Gingrich’s Tea Party ideas before his re-election campaign.
The Israeli war has suddenly made me far more ‘woke’ to the idea of desired political outcomes affecting the natural balances of markets – suddenly the geopolitical implications surrounding Israel, Saudi Arabia, Russia, Iran and yes, even Hamas in Gaza are meshing squarely with the upcoming US election, and I would be stupid to ignore how far all parties on every side of the political fence from every country named will go to retain their own seats of power – and how all that will impact squarely on oil markets and energy stocks. Biden, Netanyahu, Putin, MbF, the leaders in Hamas and Iran — each is ultimately pursuing means to retain political control, some with very little regard to the costs.
2024, by all market analysis I can see, should portend for tremendous fundamental upside for oil and oil stocks. They are, however, more and more likely to be ‘sidetracked’ by the political needs of MidEast, OPEC and other nation’s leaders. This, of course, has always been true to a degree – geopolitics have often affected markets in tremendous ways – but I now feel that this ‘influence’ is definitely accelerating, through the transactional ‘age of Trump’ to become more and more commonplace – and more commonly rationalized and whitewashed. The ends seem to justify the means – more and more often — even to include the mass slaughter of civilain innocents. Nothing else could explain the timing of this attack from Gaza.
To put it simply: I am starting to believe that oil won’t be allowed to get to triple digits in 2024, or certainly won’t be allowed to stay there for long if they do, no matter what fundamental market forces are at work. The economic benefits of higher oil prices are currently outweighed by the political benefits of keeping prices lower for the time being. The world’s leaders (all of them, but particularly Biden) – will see to it.
That realization has me looking to adjust our portfolios significantly over the next several weeks and months – which, if you’re looking for the short answer, will put us increasingly in larger multi-national mega-cap integrateds, natural gas and (here’s the reveal) renewable energy stocks, particularly solar.
Especially because the most stalwart and well-run renewable energy stocks I have followed for near a decade have seen such stunning drops in the last few months, it seems not only fitting, but likely most profitable – to start looking at these first as we contemplate our portfolio adjustments. This will be the benefit to the raising of cash we have done in the last month – precisely to take advantage of displacements and opportunities that might emerge in times of unforeseen volatility.
We’ve had tremendous success with our energy stocks in the last two years – I am currently planning for the next two.
Stand by – New ideas will be arriving shortly through the paid alerts newsletter – hopefully with a coherent market rationale to go with them, provided I can sufficiently process the horrors we’ve all seen were perpetrated upon innocent Israelis in the past week.
I hope you will consider joining me there if you’re not already a subscriber
dan@dandicker.com
