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Denny Wright
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I believe that United States energy independence is a myth. While it is clear that shale oil and gas production has rapidly expanded, so has the cost of production. I am a contrarian in search of beaten down stocks and sectors. In particular, I am extremely interested in the energy and precious... More
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  • Oily Red Lines

    How will Congress respond to Obama's red line challenge? If an attack against Syria is launched, a myriad of responses are possible: Syria and/or Iran sends missiles into Israel, Shiites increase bombings of oil and gas pipelines in Iraq, or violence continues to spread into Lebanon. Even the best HFT algorithms that dissect the true meaning of every Bernanke utterance, may have difficulty figuring out what the consequences of American missiles hitting Syria may be.

    Meanwhile, world oil supply is under constant assault. Libyan oil exports have been deeply cut, Iraq appears to be descending into civil war, Egypt is in economic and political turmoil, and Nigerian production is reduced because of constant sabotage and theft. If Congress follows the desire of the majority of Americans and does not authorize an attack, what happens to the red line of Iranian nuclear capability? The question of possible actions by Israel with or without American assistance would hang over the oil markets like a perpetual black cloud. Thank goodness America is heading toward energy independence and that the Saudis have limitless oil production capabilities.

    Tags: USO, Oil
    Sep 01 12:28 PM | Link | Comment!
  • Middle East Meltdown

    As difficult it is to imagine how much longer Eurozone stocks can rally in the face of unbelievable youth unemployment, it's equally mind boggling how little investment media attention is given to the rapidly degenerating situation in the Middle East. Violence is spreading from Syria into Lebanon as Russian arms flow to Assad's forces. The French claim to have proof of Sarin gas usage by the same government that Russia is supporting. Israel watches warily, perhaps planning for the next missile strike. In Iraq, a day doesn't pass when there are tens of bombing victims as hatred between Sunnis and Shiites escalates. Meanwhile, Iran plays its usual cat and mouse game with nuclear inspectors. Which red line crossing will require US intervention?, Iranian nuclear capability or proof of Syrian government Sarin use? Any western military involvement beyond supplying arms should trigger significantly higher Brent prices. If that happened, will the myth of US energy independence keep WTI below $100? I'm not sure how much the possibility of a Middle East meltdown factored into Andy Hall's investment in Brent 2015 contracts but the world seems to be getting more dangerous every day. With record high debt levels and seemingly endless money printing programs across the globe, the world economy cannot afford rising oil prices. More directly, the energy dependent and economically battered Eurozone cannot afford rising Brent prices. Short Europe through EPV or puts on an ETF and go long oil.

    Disclosure: I am long EPV.

    Tags: EPV, Oil, Middle East
    Jun 05 2:34 PM | Link | Comment!
  • Play Oil With Silver

    As the trumpets of US energy independence herald a future of manufacturing growth and a stronger USD, the best play may be silver. The reason is cost. First, the rising cost of oil provides a steady and reliable brake on the US and world economy. In a recent interview with Charlie Rose, Jeremy Grantham stated that the days of $30 oil that fueled the economy since WW II are a part of history that will never be repeated. Whether you believe that the cost of shale oil production is $70 or $90 is irrelevant because either price guarantees that GDP growth over 4% is impossible. But the Fed is intent on pursuing its mandate of reducing unemployment so it will continue to follow QE for as long at the eye can see. Without a viable transportation alternative in sight, the chance of being bailed out by technology is minimal. But while the downside of oil is limited by QE, production costs, and the supply of cheap oil, the upside is constrained by the damage $100 WTI does to the economy. Somewhere around that price, demand wanes and the price drops. With this background, gold and silver should be considered as the Fed prints to promote long term growth despite the headwind of constricted energy supply. If one believes that growth can occur without rising energy costs, or that the supply and price of shale oil can indeed live up to its billing, silver and gold are not viable options. However, if you are a bit skeptical of US energy independence, Sprott inc., offers physical silver (NYSEARCA:PSLV) and gold (NYSEARCA:PHYS) investments that give the option of taking physical delivery. Also, the junior miner sector has been beaten down to the point where many stocks trade like options. The stocks can go to zero or could go parabolic if silver and gold rebound sharply.

    Disclosure: I am long PSLV.

    Mar 15 1:34 PM | Link | Comment!
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  • $SU and other Canadian oil and gas producers benefit as red line in Syria is crossed. Iran, Iraq, Russia, China, next move?
    Jun 14, 2013
  • #XOM. What is the nat gas price which allows Mr. Tillerson to keep his shirt? Production cost of energy independence, Mr. Blankfein?
    Jun 13, 2013
  • Red lines everywhere: Sarin gas usage, Iranian nuclear capability, and red stock market arrows across the globe.
    Jun 5, 2013
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