Know which way is the salmon and which way is the stream!
Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next discussion with that very intent.
When you have the time could you explain why energy will be a good place to be if the world slows down? Does it have to do with the dollar problem? I understand the dollar problem, but if demand slows for oil because of a recession how does energy figure in? Or have I misunderstood that you are not saying there will be an economic slow down when and if our problems come home to roost.
In my most humble opinion, one of two scenarios will likely unfold in the months and years ahead. If the Fed continues to prop up the economy via easy money, the stagflationary pressures will pressure the dollar and alternative currencies (metals) should provide a relative safe haven. If Elmer weans us off the spigot, we'll likely see deflation set in and remove the monetary crutch that has helped spur the CRB to 23-year highs. That script will deflate asset classes en masse.
Either way, it's my gut that energy is in a secular bull market and will ultimately recapture the top weighting in the S&P. To date, and despite the massive jig we've already seen, energy accounts for merely 8% of the current S&P---far below the 27% weighting it once held. Now, whether that's a combination of absolute or relative returns remains to be seen, although my sense is that it'll likely be a combination of both. And while I'm expecting a serious retracement (lower) in crude before this trend continues, it'll likely play out for many years to come.
Minyan Jeff Saut of Raymond James has been on the "long 'stuff' stocks" train for quite a while and it's been massively profitable. So please know that this isn't a "new" thought, per se. However, as the dollar continues to be in a stealth bear market (in the sense that most folks don't realize that the basis of their investments are down 27% in the last 2 1/2 years), it behooves us to "see" the evolution that is already in play. Jim Rogers has an index that tracks this progression nicely if you would like to follow along at home.
So that's about it from where I sit. And Minyans, please know that we have structural "situation" in my office in that a water main broke and flooded our I.T. room. So while I'm furiously writing (and hoping I can continue to scribe my vibe), my "eyes" have blinders on them. I've spoken to the other professors and they're gonna step up to help. As soon as we're up and running again, you'll surely be the first to know.
Thanks kindly and good luck in the muck!
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