Last year, I wrote a somewhat bearish article on the long-term price of oil. While I am sticking to my guns long-term, a recent research piece published by Confluence Investment Management’s Bill O’Grady (one of the best energy analysts) sets a near-term bullish tone for the price of crude and natural gas. O’Grady suggests that oil prices remain steady thanks to “OPEC production discipline and solid global oil demand”. Based on his firm’s methodology, he suggests a fair value price of $72.49. Looking at a recent chart of the price action for West Texas Intermediate (WTI),… Read More

Last year, I wrote a somewhat bearish article on the long-term price of oil. While I am sticking to my guns long-term, a recent research piece published by Confluence Investment Management’s Bill O’Grady (one of the best energy analysts) sets a near-term bullish tone for the price of crude and natural gas. O’Grady suggests that oil prices remain steady thanks to “OPEC production discipline and solid global oil demand”. Based on his firm’s methodology, he suggests a fair value price of $72.49. Looking at a recent chart of the price action for West Texas Intermediate (WTI), I would have to agree. As the first quarter of 2018 ends, crude has traded in a 10-point range. If O’Grady’s forecast is accurate, it would suggest a near-term upside of 18% — not bad for an asset that will be range-bound for the near future. Natural gas may be going along for the ride as well. After a significant pullback, it looks as though the commodity has bottomed. So how do investors play this short-term trend? One of the best ways would be in the master limited partnership (MLP) space. I’ve identified three names in… Read More

I had a front-row seat when I got into the investing business in the mid-1990s. I clearly remember recommending dividend stocks as investor appetite increased for growth stocks, primarily in the exploding technology sector. That tech-fueled bull market was born in the mid-1980s as the U.S. economy struggled with inflation, high interest rates and the desire to break free of a stagnant business cycle. That was the pessimism phase. The skepticism phase was inspired by Reagan-era tax cuts and the worry over the federal deficits they would create. As the business cycle improved, stocks led the march toward optimism after… Read More

I had a front-row seat when I got into the investing business in the mid-1990s. I clearly remember recommending dividend stocks as investor appetite increased for growth stocks, primarily in the exploding technology sector. That tech-fueled bull market was born in the mid-1980s as the U.S. economy struggled with inflation, high interest rates and the desire to break free of a stagnant business cycle. That was the pessimism phase. The skepticism phase was inspired by Reagan-era tax cuts and the worry over the federal deficits they would create. As the business cycle improved, stocks led the march toward optimism after a brief but violent tumble in 1987. That led to the euphoria stage a decade later as all things tech became the everything and the ONLY thing. #-ad_banner-#The bull market was 18 years old at the turn of the century with the S&P 500 climbing from 117.30 in 1982 to 1,425.59, turning in a staggering annual return of 62% exclusive of dividends. Nine years later — after the bursting of the tech bubble, 9/11, and the financial crisis of 2008 — the bull was dead, having shed 40% of its value. The S&P began 2009 under the 1,000 mark at… Read More

As I write this, U.S. equity markets have pulled themselves out of correction territory, with both the S&P 500 and the Dow Jones Industrial Average rising to a little better than 5% off their record highs. Only time will tell whether this is just a momentary pullback or the beginnings of something more sinister. What is certain is that market volatility has finally come out of hibernation, jangling the nerves of many investors who have become complacent during the recent rising tide. This isn’t always a bad thing. If anything, it reminds us to stay on our toes. #-ad_banner-#So, with… Read More

As I write this, U.S. equity markets have pulled themselves out of correction territory, with both the S&P 500 and the Dow Jones Industrial Average rising to a little better than 5% off their record highs. Only time will tell whether this is just a momentary pullback or the beginnings of something more sinister. What is certain is that market volatility has finally come out of hibernation, jangling the nerves of many investors who have become complacent during the recent rising tide. This isn’t always a bad thing. If anything, it reminds us to stay on our toes. #-ad_banner-#So, with the reminder that markets can and do go down, it makes sense to do a little portfolio housekeeping. Here are three things I recommend doing in the current market environment. 1. Review Your Objectives Are you approaching your goal? Whether it’s retirement or paying for college, if that’s the case it may be time to step back, look over your portfolio, and asses the amount of risk you’re taking. If you’re running a balanced portfolio (stocks and bonds), the stocks allocation has probably pulled ahead of the bonds portion. If your plan requires dialing back some of your risk,… Read More

My parents took me to Walt Disney World for the first time when I was five years old. One of the rides I most vividly remember, now long since gone, was Mr. Toad’s Wild Ride. Based on Disney’s film adaptation of the classic book The Wind in the Willows, you recklessly “drove” an old fashioned (pre-Model T) car through a darkened, decrepit Victorian mansion. Sounds a little cheesy, I know. But for a small tyke in 1973, it was big adventure. The market has felt a little like Mr. Toad’s Wild Ride recently, with the Dow Jones Industrial Average posting… Read More

My parents took me to Walt Disney World for the first time when I was five years old. One of the rides I most vividly remember, now long since gone, was Mr. Toad’s Wild Ride. Based on Disney’s film adaptation of the classic book The Wind in the Willows, you recklessly “drove” an old fashioned (pre-Model T) car through a darkened, decrepit Victorian mansion. Sounds a little cheesy, I know. But for a small tyke in 1973, it was big adventure. The market has felt a little like Mr. Toad’s Wild Ride recently, with the Dow Jones Industrial Average posting its biggest one-day point drop ever at 1,175 points. While that is indeed significant, this chart of the S&P 500 is even more unnerving. Since equities decided to roll over like my 13 year-old yellow lab does when she wants her tummy scratched, investors have experienced a 9.56% drawdown from what appears to be a market top. A wild ride indeed. #-ad_banner-#I’m not going to dive into the nuances of why volatility has suddenly decided to return to the market, but it has — big time. And with any market pullback, opportunities are created to buy great, timely… Read More

When financial markets are on the upswing, it’s often said that a “rising tide lifts all boats”. That’s not exactly true.  Yes, many stocks go up during a broad market rally. But keep in mind that for an investor to buy a share of a stock another investor must be willing to sell that share of stock. The money has to go SOMEWHERE. That being said, certain groups of stocks just won’t participate in a rally for one reason or another. While the S&P 500 Index is enjoying a 6%-plus gain year-to-date, the S&P 500 Real Estate Sector Index doesn’t… Read More

When financial markets are on the upswing, it’s often said that a “rising tide lifts all boats”. That’s not exactly true.  Yes, many stocks go up during a broad market rally. But keep in mind that for an investor to buy a share of a stock another investor must be willing to sell that share of stock. The money has to go SOMEWHERE. That being said, certain groups of stocks just won’t participate in a rally for one reason or another. While the S&P 500 Index is enjoying a 6%-plus gain year-to-date, the S&P 500 Real Estate Sector Index doesn’t have much to celebrate. The index has given up around 3.4% so far this year, and has pulled back over 5% from its peak in November. What’s the reason? #-ad_banner-#One obvious concern is the much-hyped brick-and-mortar retail Armageddon. Last year, large retailers were shellacked as they lost market share to the likes of Amazon (Nasdaq: AMZN) and other virtual shopping entities.  Whether traditional retail’s death spiral is intensifying is up for debate. But, in typical crowd-driven market form, real estate stocks that focus on renting space to the retail industry experienced the fallout. And while that is a… Read More

Today’s vernacular is riddled with acronyms ending in the letter “O”: IMO, YOLO, BOGO, and the newest one that’s most relevant to the investing racket, FOMO, which stands for “Fear of Missing Out”.  FOMO can often drive the type of investment behavior that can lead to bubbles and mania. We saw lots of FOMO during the dot-com bubble of the late 90s.  However, professionally speaking, “fear of missing out” sounds almost as absurd as “fear of success”. FOMO in relation to investment behavior is the notion that an investor will chase prices without regard to valuation or fundamentals, driven solely… Read More

Today’s vernacular is riddled with acronyms ending in the letter “O”: IMO, YOLO, BOGO, and the newest one that’s most relevant to the investing racket, FOMO, which stands for “Fear of Missing Out”.  FOMO can often drive the type of investment behavior that can lead to bubbles and mania. We saw lots of FOMO during the dot-com bubble of the late 90s.  However, professionally speaking, “fear of missing out” sounds almost as absurd as “fear of success”. FOMO in relation to investment behavior is the notion that an investor will chase prices without regard to valuation or fundamentals, driven solely by the fear of not being able to participate in a rally. When this happens on a widespread scale, many hearts are broken, and a lot of money is lost. Pundits and talking heads contend that the market is entering this phase. I can neither confirm nor deny this. However, there are a few late-cycle bargains level-headed investors can take advantage of at the expense of FOMO lemmings. #-ad_banner-#The Financials I Like Right Now If you’ve followed my writing on StreetAuthority, you’ll know that I’m a frequent fan of asset manager stocks and master limited partnerships (MLPs). These firms… Read More

I’ll be the first to admit it — I don’t understand bitcoin. I don’t have a clue about what blockchain technology entails. What I do understand is that when EVERYONE is talking about an investment from the man on the street to the nightly news, something’s up.  Anecdotal evidence: One of my sons rode two hours to a friend’s hunting camp over the holidays. His friend’s dad, a smart but regular guy who doesn’t invest outside of the mutual funds in his 401(k), talked about nothing but the urgency to buy bitcoin.  Cue the railroad-crossing warning lights and bells. #-ad_banner-#As… Read More

I’ll be the first to admit it — I don’t understand bitcoin. I don’t have a clue about what blockchain technology entails. What I do understand is that when EVERYONE is talking about an investment from the man on the street to the nightly news, something’s up.  Anecdotal evidence: One of my sons rode two hours to a friend’s hunting camp over the holidays. His friend’s dad, a smart but regular guy who doesn’t invest outside of the mutual funds in his 401(k), talked about nothing but the urgency to buy bitcoin.  Cue the railroad-crossing warning lights and bells. #-ad_banner-#As a greenhorn, I remember the same kind of frenzy, albeit on a much larger scale, surrounding tech stocks. At neighborhood barbecues, chamber of commerce functions, and even your dentist appointment, everything was tech stocks and tech stocks were everything.  However, few people had a real grasp on this wondrous new technology, let alone how to discern winners from losers. This resulted in bad investment choices and squandered money. With stock markets grinding to record highs and seemingly incessant cryptocurrency get-rich-quick noise, it’s easy to forget what truly works over the long haul. So, now’s probably a great opportunity to revisit… Read More

I’m going to paraphrase a hippy-dippy poster I saw in a high school counselor’s office back in the early 1980s: “What if the Fed raised rates and yields did nothing?” That happened, so everyone bought stocks and held on to their bonds. The Federal Reserve hiked its benchmark federal funds rates three times during 2017, and it now stands in a range from 1.25% to 1.50%. This is a gigantic move in the short-term rate world seeing as the fed funds rate was more or less zero for a multi-year period. So how did bonds react? Here’s a chart of… Read More

I’m going to paraphrase a hippy-dippy poster I saw in a high school counselor’s office back in the early 1980s: “What if the Fed raised rates and yields did nothing?” That happened, so everyone bought stocks and held on to their bonds. The Federal Reserve hiked its benchmark federal funds rates three times during 2017, and it now stands in a range from 1.25% to 1.50%. This is a gigantic move in the short-term rate world seeing as the fed funds rate was more or less zero for a multi-year period. So how did bonds react? Here’s a chart of 10-year U.S. Treasury yields. While the Treasury yields did trade in a range that approached 100% from around 1.5% to nearly 3% over the last five years, the actual trend, based on its consistency, is a mere 50 basis point swing from 2% to 2.5%, for only 25%. This is probably the best indicator of where bond yields are going, or not going, in 2018. Here’s why… #-ad_banner-#1. It’s The Economy, Stupid!  Coined by Bill Clinton campaign strategist James Carville, this phrase is probably one of the best descriptors for explaining, well, just about anything, but especially… Read More

In 1956, geologist M. King Hubbert came up with what seemed to be an accurate prediction of “peak oil”, a theory regarding the maxing out of U.S. oil production that goes back to 1919, using statistical modeling. Hubbert projected that U.S. oil production would peak between 1965 and 1971. With the onset of the 1973 Arab Oil Embargo and ensuing energy crisis, Hubbert’s theory seemed dead on, mainly due to the United States’ dependence on imported oil increasing during the latter part of the 20th century. But here’s what really happened. The red line shows Hubbert’s… Read More

In 1956, geologist M. King Hubbert came up with what seemed to be an accurate prediction of “peak oil”, a theory regarding the maxing out of U.S. oil production that goes back to 1919, using statistical modeling. Hubbert projected that U.S. oil production would peak between 1965 and 1971. With the onset of the 1973 Arab Oil Embargo and ensuing energy crisis, Hubbert’s theory seemed dead on, mainly due to the United States’ dependence on imported oil increasing during the latter part of the 20th century. But here’s what really happened. The red line shows Hubbert’s prediction. The green line represents actual U.S. oil production. Hubbert’s “Oilmageddon” never happened thanks to the shale revolution.  And the effect on the price of oil? We know that story from visiting the pumps.  #-ad_banner-#The price of West Texas Intermediate crude (WTI) has declined nearly 62% in the last decade. Has demand dropped off? Hardly. But supply and the ability to efficiently manage the supply has changed dramatically. Never say never, but the odds don’t favor the price of oil reaching triple digits any time soon, at least not in my lifetime — and I think… Read More

I don’t like playing “futurist”. I’m going to try not to sound like an ineffective political campaign commercial, but the only way I can describe the healthcare in the United States is that it is broken. It may be beyond repair in its present form. I say this as both an expert and a consumer. The United States has the highest healthcare spending as a percentage of GDP among developed nations throughout the world. Currently, the nation spends 17% of its annual GDP on healthcare. In dollar terms, that comes to $3.06 trillion. The average amongst our peers is just… Read More

I don’t like playing “futurist”. I’m going to try not to sound like an ineffective political campaign commercial, but the only way I can describe the healthcare in the United States is that it is broken. It may be beyond repair in its present form. I say this as both an expert and a consumer. The United States has the highest healthcare spending as a percentage of GDP among developed nations throughout the world. Currently, the nation spends 17% of its annual GDP on healthcare. In dollar terms, that comes to $3.06 trillion. The average amongst our peers is just under 11%. In per capita terms, according to research from George Mason University, the United States spends, on average, $8,508 per person on healthcare. The average among developed nations is less than half of that, at $3,322. Meanwhile, as our healthcare costs escalate, so does our aging population. Pew research has determined that 10,000 members of the baby boom generation turn 65 every day. By 2030, when all boomers are 65 or older, they will account for 18% of the nation’s population. While I am an eternal optimist, I sincerely doubt the ability of our current healthcare system to care… Read More