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My friends,
Just a very quick check in as the Jewish holidays have sidelined my efforts and will likely do so at least until Wednesday – and I did not want you to go until Wednesday before hearing from me.
Clearly, the market is in deep crash mode – I saw Jeff Gundlach’s webinar a few days ago and he remarked about the FED and their innate inability to move in steady form – either they are all in with QE and throwing money at an economy that frankly doesn’t need that kind of catastrophic monetary effort, or they are doing what they are doing now, delivering quick rate hike after rate hike, along with massive Quantitative Tightening (QT?), that is, not rolling over distressed assets and letting them plunk onto the market like large, unwanted pet turtles. Gundlach calls this ‘oversteering’. I call it stupid.
Tough to buy stuff when all this is going on.
But that’s what I’m going to tell you to do.
Oil under $80 is ridiculous, considering the fundamentals. I think that Putin’s renewed threat of nuclear weapons in his losing efforts in Ukraine has increased the pressure on oil — and stocks. I guess there’s little that would quell energy demand more than the use of unmentionable weapons on a civilian population, with whatever horrifying after effects it would bring.
What’s also clear is that the actions of the US and Europe towards Russia in Ukraine cannot be changed. This is Putin’s war, he controls where it goes from here, and we are mostly powerless to affect that. Therefore, I’m going to advise you to invest as if his statements were never made – without bothering to predict either negative or positive outcomes like so many geopolitical pundits on TV who are saying either “this isn’t going to end well” (Ian Bremmer) to “this is how authoritarians always fall” (Timothy Snyder).
The energy crisis in Europe remains. Oil demand remains. Oil supply shortages remain. Natural gas, in the form of LNG, is the only reasonable solution to keeping Europe warm and their factories humming. Let’s see a streak of cold weather hit Northern Europe and see what happens to oil and gas prices – and oil and gas stocks.
I pointed out Range Resources as a gift under $26. It’s now under $24. December calls are running upwards of 75% volatility. That means you can get 9-13.5% on your money in two and a half months — that’s more than 50% annualized. You will collect this money, that’s a sure thing. Of course, you do risk Range disintegrating further. Could it? Sure. But in the entirety of the current stock market, I can find no better sector to bet on than energy, and no more worthwhile stock than this natural gas company at this price.
Gas has begun to break 3 dollars a gallon in places. That’s more than enough for the midterms and for Biden to start buying back all the SPR oil he’s released and putting a floor on prices.
When the panic subsides and money enters this market again, even if only for a while, it will seek energy first.
Don’t go crazy, but if you have cash (and you should), put some to work.
that’s all for this week.
