E.D. Hart

Switching to Value and Cutting Exposure to the Inflation Trade

Oil inventory reports are notoriously unreliable.(todays close $91.77) Trading them is beyond my area of expertise.

However, oil is not the key driving inflation, its the money spigots around the world open at full throttle. Moreover, gas will be a good value even if oil drops to $50. Deliveries are being taken in Japan and Asia for $18 mmbtu, which is what you would expect for a less polluting fuel that should trade at a slight premium to its equivalent BTU value. (i.e.-at equivalent btu value: when oil is at $91.77, natural gas should be approximately $15.26 mmbtu). Because gas is less polluting, it should eventually trade at a premium, as LNG trades globally.

Opinions inevitably vary, but I'm buying VGZ and XTO with both hands. Recession or not, the long term trend in gas and gold are going up, up, and away.

In fact, recession is almost irrelevant to gold and oil...Yuan will likely revalue this year up 7-10%, which alone will increase demand for oil, gold, and gas.

"The financials and homebuilders haven’t yet come back far enough to tempt me, but I continue to watch and wait."

You may have quite a wait.