The markets were so lousy in late June that I decided to take off for a few weeks of fly-fishing in Colorado. Alas, this year the rivers are still (it is already the 4th of July) blown out because of the huge winter snowpack. For me, this means fishing the high country lakes and streams. For a dry-fly fisherman like myself, this isn't an optimal situation. Regardless, Salida, CO always has a nice July 4th celebration and the brew fest Saturday is always a good time. So, life is good. Then, I made it back to civilization (and an internet connection) after a few weeks of stumbling around in the wilderness looking for hefty trout. I almost didn't want to check the markets. Then I thought, hey, maybe you were wrong and oil has come down. Wrong. New highs have been made in oil and the equity markets are selling off (again). Gee, what a surprise - NOT!
One thing camping and fishing in the wilderness does to a person is sharpen your senses. Your sense of smell and your awareness of your environment are heightened. You become keenly tuned in to sights and sounds. Perhaps this is simply a natural human reaction to being in an environment where lack of attention to detail could leave one in a compromising or potentially threatening situation. This is especially true if alone, which I am a majority of the time.
Likewise, the US individual investor finds him or herself in a wilderness environment - hostile and very dangerous for those not paying attention. Most investment advisors are no help as they are still preaching broad diversification. I have already written on Seeking Alpha why diversification will be disastrous in the years to come and why investors should stay OUT of the S&P500 and US bonds. Hopefully many of most of you took my advice and got out of these investments. Likewise, the crew at CNBC are no help at all as they still back the Bush administration's insane economic and foreign policies and are in 'oil denial'. Yup, you're all alone in the investment wilderness...but, at least you have The Fitzman. I am here for you.
I have written many times on Seeking Alpha on why oil is, and will continue to be, the main investment consideration for decades to come. After being away from the markets for a couple weeks, with my heightened awareness for danger and attention to detail, I am more convinced than ever that I am correct about oil and the consequences to a US economy which imports a majority of its energy. OIl has gone up another $6 a barrel in the last couple weeks. The US and Israel have the war machine's propaganda department busy getting ready for the strike on Iran. Ludicrous as it sounds being there are still two unconstitutional (and un-won....) wars being fought at present, I think they'll do it. Will Bush and Cheney feel the need to do so before their term expires? What will be the consequences of a strike on Iran?
Currently, we have oil at $144/barrel and if ya think about it, we don't even have any real 'outages' other than the Nigerian shut-ins which have been par for the course the last few years. What if the Straits of Hormuz were shut down for a few days, weeks, or months? What would the price of oil do if Israel or the US bombed Iran?
One thing is crystal clear to me: oil, natural gas, and energy in general are the only investments that make sense to me these days. Strike that - add gold, commodities, and precious metals. But ball fans, that's it. Period. Get out of everything else. Do not diversify. Batten the hatches. It's gonna get much worse before it gets better. Why? I will tell you.
The *only* solution to the oil realities of today and for the foreseeable future, is a comprehensive long-term US energy policy.
As my faithful readers know, this energy policy of mine has been a work-in-progress. The latest additions have been for a 4-day workweek and to strengthen the US dollar (not by the rhetoric of the Fed chairman, but by deeds such as balancing the budget and axing Bush's insane tax policy). Yet, as I come back from a couple weeks in the woods, STILL there is no talk of such an energy policy. All I see is more discussion of windfall profits taxes and of course the 'big picture' guys like Bush and Cheney wanting to bomb another country to get access to the oil. In the meantime....oil is up to $144...and the US markets are heading down in a big way. The US dollar remains under pressure as 'old Europe' and other emerging country investors have figured out that the US is just all rhetoric when it comes to financial discipline. The Fed is hoping to print our way out of our oil driven financial deficit. Each time the price of a barrel goes up a dollar, Ben just rings up the printer and tells him to ship another batch of hundreds out the loading dock.
All of these things are to be expected. I recently submitted an op-ed to the WSJ about the energy policy I have developed. I explained the reasons why failure to enact such a policy will have dire consequences to the US economy, the US dollar, and US investors and why subsequently their subsciption numbers will go down. Nevertheless, they balked at publishing my energy policy and I am sure did not even read it. I got the automated email response back thanking me for my submission but sorry, we'll pass. Hey, no problem! It's your jobs that will be in jeopardy when the US economy and markets tank due to the price of oil. I was doing you a favor! But, you stick with your right-wing policy editorials and support of Bush's economic policies if it makes you feel better. I mean, who can argue with the stock market returns and strength of the US dollar during the Bush administration? What a brilliant success story! Yup, you guys at the Wall Street Journal stick with the winning strategy. Thank goodness for Seeking Alpha.
But I digress. As I was saying, all these issues and the politicians responses are to be expected. What I did not expect was to see the oil and energy stocks perform so lackadasically. What is up with Exxon (XOM), ConocoPhillips (COP), Chevron (CVX), Statoil Hydro (STO), Schlumberger (SLB) and all the rest? These stocks should be at least 25% higher than current levels. Are these stocks going to go down if Bush or the Israelis bomb Iran??! Seriously, what is going on here? COP is expected to earn close to $12/share this year and it is trading at $91 and change!? COP should be trading at a minimum of $125, and, I believe the multiples for oil and natural gas companies should be *expanding* not contracting! Put a PE of say 15 on COP, and you have a stock that should trade between $150 and $200 a share over the next 12 months. In other words, the current energy sell-off has been waaaay over done. Buy COP. Buy XOM. Buy CVX, SLB, STO, Nabors Industries (NBR), Petrobas (PBR), Total (TOT) and United States Oil Fund (USO). Buy natural gas stocks. Simply put: BUY ENERGY. If you don't like stocks or ETFs, buy Vanguard Energy [VGENX] or any of my three favorite Fidelity Select Funds (Energy, Energy Services, and Natural Gas - FSENX, FSESX, and FSNGX respectively).
If you don't like energy (please see your therapist), then at least buy gold, precious metals, corn, and wheat. Buy DBC - the commodities ETF. Buy real assets. Your US dollar is under attack by policies which foster inflation and further US currency weakness.
I keep fishing for trout and for reasons why such obvious necessities, such as enacting a comprehensive long-term energy policy, seem to be so elusive. Many times in life, things just don't make sense, no matter how hard one tries to figure them out. So, just go with the flow. The flow these days is war over oil. People in power seem to have quite simply lost their minds and have the interests of the American middle class well down their 'to-do list'. For those of you who have money to invest - do so wisely or you'll lose it. It's an investment wilderness out there.
Meanwhile, just to show you that beautiful things still do exist in the world today, here is a picture of a native Colorado cutthroat from Trappers Lake. Until next time - good luck with your investments!
Disclosures: The author owns all of the suggested investments listed above. He did, however, release the fish back to Trappers Lake.