If you've happened to catch any of my comments on many of the energy articles purporting energy's price fall is near, you'll know I've been a staunch supporter of staying away from the dirty commodities. I've informed my newsletter readers over the past couple months that energy, regardless of it being nat gas, wti or brent oil, is in a spiraling decline and no matter what the talking heads, self proclaimed successful stock pickers or pundits on SeekingAlpha, CNBC, etc say...CAUTION is warranted.
That said, my goal is finally entering the seeking alpha comment boards was to hopefully counter what was and continues to be a very one sided argument by those supporting the buy oil and energy now camp. I've realized (the hard way) that when things get bad for them, they're basically clawing fir any leverage to either support their stock picks or are simply in denial.
I fell victim, like many, to following some of the experts' picks. I know only I'm to blame for hitting the buy button, but didn't want others to make the same mistake. While I wasn't in real big in the energy sector, I was in enough for it to sting.
Then, I came out with my call to buy SCO, a leveraged etf that shorts wti. I was a bit late to the party, but being up 20% across multiple investment accounts has helped make up for some of the hit I took on long bullish oil plays.
However, I noticed no one commented on the SCO play I offered to the masses. Not a negative, positive reply. Sure some people said they were staying out of energy completely, which TOTALLY makes sense if you weren't very long to begin with.
Then it dawned on me - all investors get lazy. Even Buffet with his Tesco play. The fundamentals, technicals and macro geopolitical issues have been there for most of us to see, but in this ever rising stock market, most of us have lost some semblance of discipline...whether it be energy or another sector/stock.
My recent thesis to short oil was quite simple - we can throw out all the breakeven oil prices for OPEC countries we want. We can ASSUME they are truly suffering because of this hit, but assumptions are the mother of all f-ups, and to think dictatorships that have been doing it their way for years (socially and energy pricing) will just cut production and appease western nations would be the worst assumption. Many of us don't truly understand how each of these unique countries function, how they're managed and how they are affected. In short, I like many, got lazy, lumped all of then into one entity and closed my laptop.
But, I realized this was a mistake. I'm quite the fan of world history and following up to date geo political news. So I knew in my gut holding on to energy was a bad choice. I got out before it was too late, and hedged accordingly, others are still suffering with the self-proclaimed stock picking gurus that can no longer boast about their tip ranks ranking.
Surprisingly, these same gurus continue to claim every leg down is the bottom. Even after the most recent shun by OPEC. While I wouldn't start shorting energy here, I certainly would start positions now. Why? Because no one knows where the bottom is, how long it will stay there or if energy prices will ever return to their former 150/barrel prediction glory days (a Goldman jab of course).
So, when the gurus went from clear bewilderment in September to downright pain after OPEC, how can we really take any stock in what they say?
The point of this article is actually less about energy and more about one thing...DISCIPLINE. Let's not forget to have it and use it. The bull market might not be over just yet, but cracks are starting to appear.
Stay Calm and Trade On!
Disclosure: The author is long SCO.