This Sector Is Sizzling
- Three reasons oil — and energy stocks — are set to rise even more
- Boeing tanks, Tesla shifts (again), Barrick gives up
- Mainstream wakes up to huge de-dollarization signal
- An unlikely bank robbery suspect
- Daylight saving time: Scrap it? Make it year-round? Something even more radical?
“Energy stocks are positioned for another price pop,” says Alan Knuckman from his perch in the Chicago options trading pits.
Crude oil is up nearly 1% as we write this morning, a barrel of West Texas Intermediate fetching $56.59. That’s toward the upper end of its trading range the last three weeks. It’s the most stable oil prices have been for a while now…
“Crude oil’s big price swings are often seen as a bad thing,” Alan says, mindful of that chart.
“But these emotional swings provide you with regular opportunities to bag big profits — in very little time. Oil’s positive price action led a nearly 20% surge in the S&P 500 energy sector this year.”
So why is he convinced the rally is about to start a new leg up? Three reasons…
For one thing, OPEC might be down… but it’s not out.
Maybe you saw the headline this morning about how U.S. exports of oil, natural gas liquids and petroleum products are set to surpass Saudi Arabia’s later this year. And that’s testament to America’s shale-energy know-how, for sure.
But Saudi Arabia and its OPEC compatriots are still major players. “OPEC approved a fresh round of supply cuts for 2019 in December,” he reminds us. “The group aims to reduce global supply by 1.2 million barrels a day.
“Combine those cuts with U.S.-led sanctions on oil from Venezuela and Iran, and worldwide supply is about to get a whole lot tighter.”
And right when the proverbial summer driving season approaches. “So oil should enjoy a healthy level of demand, as well as a healthy decline in supply, for the foreseeable future.”
Then there’s the likelihood of a weakening U.S. dollar.
“The dollar has a big impact on the price of crude oil, because the commodity is priced in the currency,” Alan says.
“The greenback strengthened last year as the Federal Reserve hiked interest rates. And the rising dollar weighed on crude prices.”
But now the Fed has put those interest rate increases on pause. “Without the Fed’s lift,” says Alan, “the dollar is likely headed for a dive — providing crude oil with another terrific tail wind.”
Finally, let’s get back to that chart.
Note how crude fell from a peak of just over $76 in early October to nearly $42 on Christmas Eve.
“Well,” Alan says [Warning: Chart geek stuff follows], “the midpoint of that decline is right around $60.
“From its December low, WTI has surged past $50 and $55. And it’s trading just below the 2019 high-water mark.
“Though it’s pulled back, oil has held the $55 support level so far. If crude can break through $60 and hold that level, a retest of the previous high of $76 is entirely possible.”
Alan’s conclusion: “Higher oil prices will have a profound effect on oil company profits.” And at a time when Wall Street has set a low bar of expectations.
“Last year, S&P energy companies more than doubled annual earnings,” he says. “Now, first-quarter profit estimates for energy stocks have been slashed by 32%. And that’s the biggest negative earnings revision by sector we’ve seen yet.”
That sets up a high likelihood of Q1 earnings reports that will substantially beat expectations — propelling share prices higher.
Sure, you could play it with an energy sector ETF like XLE and collect 20% by, say, late summer. But to generate big gains in a short amount of time, Alan’s options strategies can’t be beat — whether it’s energy or technology or any other sector of the market.
Late last month, his proprietary indicator delivered gains of 100% and 101% on trades he recommended no more than three weeks earlier.
Alan shows you how the system works in this presentation. Give it a look right away — it’s available to watch only through midnight tonight.
After notching their worst week since September, the major U.S. stock indexes are starting the week solidly in the green.
The Nasdaq is leading the way, up nearly 1.5% and back above 7,500. The S&P 500 is up more than 1% at 2,775 — back toward the top of its recent trading range.
The laggard is the Dow — up barely a third of a percent at 25,542, with a lot of dead weight from Boeing. BA is down nearly 7% at last check after the Ethiopian Airlines disaster — the second crash in five months involving the newest version of Boeing’s 737. (The Chinese government has already grounded them.)
Elsewhere Tesla is up 1% after reversing its decision of only days ago to close almost all of its retail stores; now as many as 90% of them will remain open. (Making it up as we go along much?)
And in the gold-mining sector, No. 1 producer Barrick is giving up its hostile bid for No. 2 Newmont. Instead the two companies will form a joint venture for their mines in Nevada, which lie nearly cheek to jowl. The move would achieve those all-important “synergies” while keeping the antitrust division of the Justice Department at bay.
The gold price is under pressure this morning, down about $5 at $1,292.
Took long enough, but the mainstream is waking up to a major story that could be a major catalyst for “de-dollarization.”
For a year and a half we’ve been telling you about the Nord Stream 2 pipeline — an ambitious project that would ship natural gas under the Baltic Sea from Russia to Germany. It’s a sore spot with Donald Trump and his administration, who would rather the Germans buy more expensive LNG — liquefied natural gas — from the United States.
This morning’s Wall Street Journal devoted a front-page story to the subject — including the prospect of stepped-up sanctions against companies involved in Nord Stream 2, which would not sit well in Berlin.
Most of the story was old hat if you’ve been reading The 5: Germany needs more gas to wean its power grid off nuclear and coal. The economics of LNG — supercooling it into a liquid state, loading onto tanker ships and returning to a gas state — adds at least 20% to the cost. So the pipeline from Russia — much of it paralleling an existing pipeline — makes the most sense to the Germans. And besides, it’s a private project — not funded by the government.
The Journal story contained one new nugget… and it’s even more significant than the paper lets on.
If U.S. sanctions are stepped up, the Russians are prepared to have the state-owned energy company Gazprom buy out its Western partners and complete the pipeline on its own. “Without Western investors, Russian state-controlled banks would take over, possibly with some Chinese financing, a Gazprom spokesman said.”
Where there’s a will, there’s a way: It reminds us of the “special purpose vehicle” the Germans, French and British are setting up to end-run U.S. sanctions on Iran. Both arrangements would get around dollar dominance of global trade flows and Washington’s role as “the economic policeman of the planet,” to use the words of France’s finance minister last year. Nord Stream 2 is one more step on the road to “de-dollarization.”
Well, it’s not the usual profile of a bank robbery suspect…
The feds accuse Karl Doron of robbing several Navy Federal Credit Union branches in and around San Diego, collecting more than $13,000. He was arrested last week and has pleaded not guilty to 10 counts — including seven of bank robbery. He faces up to 14 years and four months.
“Doron’s attorney says he is trained as a neuroscientist and holds a Ph.D.,” reports San Diego’s Fox affiliate. “According to his LinkedIn profile, he studied philosophy and psychological and brain sciences at UC Santa Barbara and was a researcher at UC San Diego for about a year starting in 2014.”
The hapless TV reporter was assigned to get the predictable reaction from Doron’s neighbors, and she did not disappoint. “You don’t expect to find out that they’re doing something like a bank heist,” said one. “There’s not really any way to rationalize how or why someone would do that, but particularly someone who’s coming from a field based in education. I would not expect that to happen.”
No way, really?
And people ask your editor why I got out of the TV news racket…
“Daylight saving time should be abolished everywhere,” says the first entry in our inbox today — capturing the consensus of The 5’s readership after we broached the topic Friday.
“Time to end it,” says another.
“It messes up my biorhythms big-time!” says a third. “It may be the one issue I feel strongest about in life. Get rid of it!”
“I for one would like daylight saving time year-round,” says a reader with a variation — and he’s not alone.
“Yeah, the change in spring is tough, so let’s get rid of the change in the gall too. Fine by me.
“For those of us who work 8-to-5 jobs, DST is the thing that lets us get outside after work for nine holes of golf or evening playtime with the kids.
“My wife would prefer no DST — she complains she doesn’t see me from March–October. I guess I should be glad she wants to see me!”
“I would hope that people looking at the bigger picture would see the many benefits of remaining on daylight saving time all year round!” chimes in another.
“As a retired teacher and someone who struggles with SAD, I can see sooo many benefits from permanent DST! For example, how many kids across the country leave school every afternoon in late fall and early winter only to arrive home to a dark empty home — not to mention the hazards they face on their way home?
“Plus how uplifting and how much safer is it to leave work in daylight to drive home each afternoon? Hopefully common sense and intelligence will prevail.”
The 5: Ah, memories are short: Congress passed and President Nixon signed a bill authorizing year-round DST amid the “energy crisis.” Clocks thus jumped ahead on Jan. 6, 1974.
People hated it, mostly because legions of kids were going to school in the dark. The whole thing was scrapped in time for the winter of 1975–76.
Maybe if it hadn’t been imposed on a shock basis right after kids were coming off Christmas vacation, the perception might have been different…
“Let’s go a step further,” writes our final correspondent. “Put the entire U.S. (and Canada if they want to) on one time zone.
“Consider how that would simplify plane, train and bus schedules or conference calls. It works for the military; all Navy ships at sea are on Zulu time (GMT). If the Pentagon says to do something at 0900Z, all ships anywhere do the action simultaneously. Does it really matter to you if you have breakfast at 4 a.m. or 4 p.m.? Is your life so dictated by a clock?”
The 5: Hmmm… China, which is more or less the same width as the continental United States, is under a single time zone. That means people in Xinjiang and Tibet don’t see the sunrise in winter until 10:00 a.m. or so.
A few years ago an economist named Allison Schrager got some buzz when she proposed merging the Eastern and Central time zones… which would be one hour ahead of a merged Mountain-Pacific time zone. She felt that would be in step with a “more integrated and mobile” world where folks on Central Time already conduct much of their lives an hour earlier than those on Eastern anyway. “In reality,” she said, “America already functions on fewer than four time zones.”
A website called standardtime.com proposes a similar arrangement, but with a two-hour separation between the two zones. That would probably create less havoc relative to the rest of the hemisphere.
Meanwhile, Johns Hopkins economist Steve Hanke has indeed proposed putting the entire world on UTC, or Greenwich Mean Time in the old parlance.
None of these proposals have gone anywhere. One step at a time…
The 5 Min. Forecast
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