What’s Going On…
In the words of my main man Marvin Gaye, I have to ask this question. There are so many things that are devastating this country at this point. For some that have been watching the numbers it was definitely pointing to a direction of economic prosperity. Gross Domestic Product (GDP) numbers have been at higher than expected levels, employment numbers, the housing market, and even the stock market have all been on the rise. However, as we all know there are and we still face a number of hurdles in maintaining this progress.
At first, we had the war in Iraq. Being an avid stock market participator I watch the events fold as uncertainty rose around the war. The market was taking a dive and the only thing worth buying was defensive stocks and commodity plays. Common stock picks at the time were Halliburton, Lockheed Martin, and Boeing for defensive plays. Oil was bubbling as a major topic and industry stalwarts of the beaten down sector were mentioned as huge turnaround plays. Common names here were Exxon, ConocoPhillips, Chevron, international oil stocks, the hard to refine oil sands in Canada, the refineries, etc.
As I have been quoted as saying I have a love/hate relationship with the gas pump. At this time I owned or was researching the following stocks ( I will try to include prices, if you want a jaw dropper see where some are at now). So every time I paid at the pump I was getting cash back in my account:
PetroChina (PTR) – bought in the mid 40s
Cheasapeake Energy (CHK) – bought around 17
Layne Christensen (LAYN) - bought at 13.95
Valero (VLO) – bought in the late 40s
XTO Energy (XTO)– bought around early to mid 20s
S&P Energy Fund (XLE) – bought around the early 30s
They all ran up to huge profits and I sold PTR, CHK, LAYN, and XLE. Who would have guessed what was next to make this look like a dumb move…
- The uncertainty of the global landscape – Afghanistan, Iran, Iraq, Korea
- Inflation – as inflation continues to rise the cost of normal goods will continue to rise
- Hurricanes – The devastation of the SE due to natural disasters is also affecting the where a number of the countries largest refineries are located
At this point, it will be interesting to watch the market reaction to these events. I remember how the market slowly went numb and didn’t react viciously every time there was a new story out of Iraq anymore. I am not sure if this will continue but Hurricanes, a potential Housing Bubble, and rising interest rates are still looming over this economy.
Just as of today the protected oil reserves are being released to ease the tension over gas prices. The EPA has even relaxed its emission and sulfur standards to assist during this period of slight instability. The question has been asked, “At what point will people really be affected and change their habits due to the world that’s changing around us”. And who knows what the answer is I thought it would be $3 dollar a gallon gas prices. But that should be eclipsed all over the country by Labor Day Weekend.
Finally, please take the time out to pray for all the people being impacted in the South because of the hurricanes. There are devastating pictures all over the Internet and constant new coverage. Unfortunately, I am usually aware from the market’s standpoint of how these things will play out so I can keep you updated there.
Be on the lookout for my 1st edition of Ball Street my version of how to make money on the street and how to stretch your dollar during tough times. Here is a peek of watch to watch for because of the changing environment.
Oil, Oil, Oil – to put it in perspective oil at around $28 dollars a barrel was average just a few years ago when I barely paid attention. Now it has tipped the scales at $71!! And where is it going up... and its not coming down anytime soon. Stock plays in this area should continue to be the refineries: Valero (VLO), Suncor (SUN), and Royal Dutch (RDS). Keep an eye on the large service sector: Exxon Mobil (XOM), Haliburton (HAL), and Schlumberger (SLB) to name a few.
Watch the commodity sectors closely. Metals, mining, and minerals will be big going forward. Look for Massey Energy (MEE) and Peabody Energy (BTU) to lead the charge. Watch some of the specialty areas such as liquefied natural gas (LNGs) plays, oil sand companies, international oil companies, and alternative fuel companies.
More to come so stay tuned.
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