Showing posts with label MARKET ANALYSIS. Show all posts
Showing posts with label MARKET ANALYSIS. Show all posts
Friday, June 17, 2011
Thursday, June 16, 2011
Wednesday, June 8, 2011
Wednesday, June 1, 2011
Market Strategist: “We’re on the verge of a great, great depression”
 |
| Dees Illustration |
CNBC
Wall Street Baffled by Slowing Economy, Low Yields: Trader
Wall Street is having a hard time figuring out what to do now that the U.S. economy appears to be sputtering and yields are so low, Peter Yastrow, market strategist for Yastrow Origer, told CNBC.
"What we’ve got right now is almost near panic going on with money managers and people who are responsible for money," he said. "They can not find a yield and you just don’t want to be putting your money into commodities or things that are punts that might work out or they might not depending on what happens with the economy.
"We need to find real yield and real returns on these assets. You see bad data, you see Treasurys rally, you see all bonds and all fixed-income rally and then the people who are betting against the U.S. economy start getting bearish on stocks. That’s a huge mistake."
Stocks extended losses after the manufacturing fell below expectations in May and the private sector added only 38,000 jobs during the month.
"Interest rates are amazingly low and that, thanks to Ben Bernanke, is driving everything," Yastrow said. "We’re on the verge of a great, great depression. The [Federal Reserve] knows it.
Wednesday, May 18, 2011
Thursday, April 28, 2011
Thursday, March 24, 2011
Friday, December 10, 2010
Chart of the Month: TSX-V Speaks Volumes - Gold Mania Still Ahead
Andrey Dashkov
Casey's International Speculator
With the gold price hitting nominal highs last month, there is a lot of “mania” and “bubble” ranting going on in the gold community. Should we start selling?
A bull market typically progresses through 3 phases: the Stealth Phase, in which early adopters start buying; the Wall of Worry Phase (or Awareness Phase), when institutions begin buying and every significant fluctuation makes investors worry that the bull market is over; and the Mania Phase when the general public piles on, driving prices beyond reason or sustainability.
This is followed by the Blow-off Phase, when the bear takes over from the bull and the herd gets slaughtered. Judging by the volume on the TSX Venture Exchange (TSX-V), where a lot of gold juniors are listed, we conclude that the next phase of our current gold bull market, the Mania, still lies ahead.
Have a look at the chart below:
If a mania were unveiling now, we would expect to see a sharp increase in investment capital entering the TSX-V, driving its trading volume upward. Over the last few months, the TSX-V dailyvolume has spiked upward sharply, but as the chart clearly shows, short-term volume is extremely volatile, spikes are common, and equally large drops are just as common.
Stocks of junior exploration companies are leveraged to gold, meaning they rise or fall by a greater percentage than does the yellow metal itself. So a spike in volume should be expected in reaction to an ascending gold price. A more reliable barometer is volume’s 10-period moving average that removes interim market gyrations. Using this measure, the TSX-V’s volume looks like it has returned to a slope of ascent similar to before the 2008 market crash, and the longer-term trend is steadily upward – steady being the key word.
More investors are entering our market, but the pace is not yet accelerating greatly, as we’d expect in a true Mania Phase. In other words, an early indicator of the mania in this bull cycle will be a sustained parabolic move upwards in the TSX-V’s average volume. And that is not happening yet.
Our other volume indicator, the GLD gold ETF, behaves in an interesting manner: it frequently moves counter to the TSX-V. An explanation for this might be that GLD is considered a “blue-chip” stock; a safer haven for investors who actively trade on the TSX-V and park their cash in GLD during periods when they consider juniors overly risky.
The moving average of GLD’s volume remains on a moderate multi-year ascent but has turned down recently. However, its daily volume is up in recent trading. Given the observed correlation between trading volumes of the TSX-V and GLD, this may point to a cooling-down in TSX-V trading activity in the near term.
Finally, the ^HUI gold miners index has tracked TSX-V volume as well, also having resumed a slope of ascent similar to that of the years before the 2008 crash. We see this as another indication that we are in an accumulation phase of the bull market.
We will continue tracking these parameters and updates when we see significant changes. For now, the bottom line is that even with the gold price moving sharply higher, the mania remains an anticipated future event.
----
[But when the Mania Phase does hit, there’ll be no stopping it. And the best leverage – beating the S&P 500 by more than 8 times – comes from the little-known “gold nuggets” that International Speculator editor Louis James keeps digging up for his subscribers. For a very limited time, you can save $300 on the annual subscription fee – plus receive Casey’s Energy Report FREE for a year! To learn more, click here now.]
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Casey's International Speculator
With the gold price hitting nominal highs last month, there is a lot of “mania” and “bubble” ranting going on in the gold community. Should we start selling?
A bull market typically progresses through 3 phases: the Stealth Phase, in which early adopters start buying; the Wall of Worry Phase (or Awareness Phase), when institutions begin buying and every significant fluctuation makes investors worry that the bull market is over; and the Mania Phase when the general public piles on, driving prices beyond reason or sustainability.
This is followed by the Blow-off Phase, when the bear takes over from the bull and the herd gets slaughtered. Judging by the volume on the TSX Venture Exchange (TSX-V), where a lot of gold juniors are listed, we conclude that the next phase of our current gold bull market, the Mania, still lies ahead.
Have a look at the chart below:
If a mania were unveiling now, we would expect to see a sharp increase in investment capital entering the TSX-V, driving its trading volume upward. Over the last few months, the TSX-V dailyvolume has spiked upward sharply, but as the chart clearly shows, short-term volume is extremely volatile, spikes are common, and equally large drops are just as common.
Stocks of junior exploration companies are leveraged to gold, meaning they rise or fall by a greater percentage than does the yellow metal itself. So a spike in volume should be expected in reaction to an ascending gold price. A more reliable barometer is volume’s 10-period moving average that removes interim market gyrations. Using this measure, the TSX-V’s volume looks like it has returned to a slope of ascent similar to before the 2008 market crash, and the longer-term trend is steadily upward – steady being the key word.
More investors are entering our market, but the pace is not yet accelerating greatly, as we’d expect in a true Mania Phase. In other words, an early indicator of the mania in this bull cycle will be a sustained parabolic move upwards in the TSX-V’s average volume. And that is not happening yet.
Our other volume indicator, the GLD gold ETF, behaves in an interesting manner: it frequently moves counter to the TSX-V. An explanation for this might be that GLD is considered a “blue-chip” stock; a safer haven for investors who actively trade on the TSX-V and park their cash in GLD during periods when they consider juniors overly risky.
The moving average of GLD’s volume remains on a moderate multi-year ascent but has turned down recently. However, its daily volume is up in recent trading. Given the observed correlation between trading volumes of the TSX-V and GLD, this may point to a cooling-down in TSX-V trading activity in the near term.
Finally, the ^HUI gold miners index has tracked TSX-V volume as well, also having resumed a slope of ascent similar to that of the years before the 2008 crash. We see this as another indication that we are in an accumulation phase of the bull market.
We will continue tracking these parameters and updates when we see significant changes. For now, the bottom line is that even with the gold price moving sharply higher, the mania remains an anticipated future event.
----
[But when the Mania Phase does hit, there’ll be no stopping it. And the best leverage – beating the S&P 500 by more than 8 times – comes from the little-known “gold nuggets” that International Speculator editor Louis James keeps digging up for his subscribers. For a very limited time, you can save $300 on the annual subscription fee – plus receive Casey’s Energy Report FREE for a year! To learn more, click here now.]
Buy 1 Get 2 Free at Botanic Choice Buy 1 Bottle and Get 2 FREE (select items), plus Free Shipping on $25+ Expires 12/31/2010
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Tuesday, November 9, 2010
Gold at $7800/oz, Or S&P 500 at 220? Take Your Pick
The chart below (to the right, Ed.) shows yet another way to look at the value of the stock market and gold in relation to each other.
The S&P 500 to gold ratio essentially prices the stock market in terms of gold. (Normally, it is priced in terms of dollars. Alternative reference points could include barrels of oil, acres of land or any other thing of value.) This helps provide a way to evaluate the market adjusting for a loss in purchasing power.
A few observations:
- The ratio of S&P 500 to gold reached a bottom in 1981 - i.e. gold valuations reached a peak.
- Between 1981 and 2000 the stock market rose in real terms.
- Between 2000 and present the stock market lost value in real terms.
- The S&P 500 to gold ratio has not yet fallen to historical lows. To reach historical lows set in 1981 the S&P 500 would either need to fall to 220, gold would need to rise to $7800/oz or some combination of the two.
Disclosure: I own some bullion
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Wednesday, September 22, 2010
The Great Divergence: Private Investment and Government Power in the Present Crisis
 |
| Robert Higgs |
Also by Robert Higgs:
Crisis and Leviathan: Observations amid the Current Episode 05/21/10
Campaign For Liberty
Private saving and investment are the heart and soul of the dynamic market process. Together they provide and allocate the resources used to augment the economy's productive capacity, generate sustained long-run economic growth, and thereby make possible a rising level of living. Economic crises interrupt this process by discouraging investors and causing them to consume their resources or to employ them in relatively safe, low-yielding ways. Absent entrepreneurs willing to take the great risks that characterize investments in great technological and organizational innovations, the growth process fades into economic stagnation or even decline.
The present recession starkly displays this characteristic crisis-related abatement of the economy's investment process. Indeed, the decline of private investment during recent years has been much greater than most observers realize. Consider the following data, taken or derived from the most recently revised National Economic Accounts prepared by the Commerce Department's Bureau of Economic Analysis (Tables 1.1.5, 1.1.6, and 5.2.6).
In 2006, gross private domestic investment reached its most recent peak, at $2.33 trillion (in constant 2005 dollars), or 17.4 percent of GDP. After remaining almost at this level in 2007, this measure of investment fell substantially during each of the next two years, reaching $1.59 trillion, or 11.3 percent of GDP, in 2009. This decline is severe enough, but it does not give us all the information we need to gauge the extent of the investment bust.
The greater part of gross investment consists of what the statisticians call the capital consumption allowance, an estimate of the amount of money that must be spent simply to offset wear and tear and obsolescence of the existing capital stock. In a country such as the United States, with an enormous fixed capital stock built up over the centuries, a great amount of funds must be allocated simply to maintain that stock. In recent years, the private capital consumption allowance has ranged from $1.29 trillion in 2005 to $1.46 trillion (in constant 2005 dollars) in 2009. Thus, even in the boom year 2006, about 60 percent of gross private domestic investment was required merely to maintain the economy's productive capacity, leaving just 40 percent, or $889 billion in net private domestic investment, to augment that capacity.
From that level, net private domestic investment plunged during each of the following three years, taking the greatest dive between 2008 and 2009, when it fell to only $54 billion (in constant 2005 dollars), having declined altogether by 94 percent from its 2006 peak! Last year only 3.5 percent of all private investment spending went toward building up the capital stock. Thus, net private investment did not simply fall during the recession; it virtually disappeared.
Unless this drastic decline is reversed soon, the future will be bleak for the U.S. economy. Without substantial net private investment, brisk economic growth is unthinkable beyond the very short run. Although private investment spending has recovered somewhat since it reached its trough in the third quarter of 2009, gross private domestic investment in the most recent quarter (April to June) of 2010 remained 21 percent below its peak in the first quarter of 2006, and net private domestic investment remained about 64 percent below its previous peak.
While this private-sector disaster was occurring, however, the government sector of the economy was booming. The ratio of all federal government spending -- purchases of goods and services plus transfer payments -- to GDP increased from 20.6 percent in the fourth (October to December) quarter of 2007 to 25.4 percent in the most recent (April to June) quarter of 2010.
Of this increase, about 73 percent represents an increase in transfer payments. According to the National Economic Accounts (Table 3.2), federal transfer payments for social benefits to persons -- old-age pensions, unemployment-insurance benefits, disability-insurance benefits, Medicare benefits, and so forth in great variety -- increased from a seasonally adjusted annual rate of $1.28 trillion in the fourth quarter of 2007 to $1.72 trillion in the second quarter of 2010 — a leap of more than one-third in only two and a half years. During the same period, government grants-in-aid to state and local governments rose from a seasonally adjusted annual rate of $382 billion to $525 billion, an increase of more than 37 percent.
Data compiled by the Bureau of Labor Statistics show that the number of private nonfarm employees fell from 114.1 million in 2006 to 108.4 in 2009, and even further this year, reaching 107.9 million in August 2010. At the same time, the number of government employees at all levels increased from 22.0 million in 2006 to 22.5 million in 2009, although a slight reduction has occurred recently, putting the number at 22.4 million in August 2010.
The Federal Reserve System has played a major role during the current recession, acting in unprecedented ways to inject funds into the financial system in general and into selected failing firms in particular, especially AIG, Fannie Mae, and Freddie Mac, which have been effectively taken over by the government, giving rise to a situation in which the government supplies or insures about nine-tenths of all new residential mortgage loans. Before the recession, the Fed's financial assets consisted overwhelmingly of U.S. Treasury securities. It now holds a variety of securities, including mortgage-backed securities valued on the Fed's books at approximately $1.1 trillion. In this way, the Fed has become the major direct source of funds for the government-sponsored enterprises that provided an inviting secondary market for the commercial banks and other primary lenders that inflated the housing bubble.
Through the TARP scheme, created late in 2008, the U.S. Treasury acquired ownership stakes in hundreds of commercial banks.
Of course, the government also took over General Motors and Chrysler, bypassing existing bankruptcy laws and ramming into place restructuring arrangements that served the Obama administration's political goals, especially its support for members (active and retired) of the United Auto Workers.
The foregoing measures constitute only a small fraction of the many significant actions the federal government has taken to augment its size, scope, and power during the current recession. Thus, while the market system's driving force -- private investment -- was being brought to its knees, the government's crisis-driven surge only added an additional discouraging feature to those operating though market channels, such as the reluctance of commercial banks to make new loans and investments and the desire of households to repay debts and increase their holdings of cash balances. A government growing in so many different directions at once, with many additional initiatives -- such as higher tax rates, new taxes on energy use, and new restrictions on financial service providers -- still awaiting enactment or regulatory specification, creates tremendous uncertainty for anyone contemplating a long-term investment: who knows what the contours of future government exactions, restrictions, and requirements will be, and hence whether a particular investment will prove to be profitable or not?
Therefore, a major consequence of the Great Divergence — the starvation of private investment and the feasting of government -- is what I call regime uncertainty. This form of uncertainty is a pervasive incalculable apprehension about the future security of private property rights in capital and the income it yields to investors; indeed, a pervasive apprehension that extends beyond investors to include nearly all private participants in the economy — consumers, workers, and managers, as well as investors -- in regard to the future economic order. The Great Divergence in itself is very bad news. Its effects in enhancing regime uncertainty only make it more unfortunate for everyone outside the privileged precincts of government.
Robert Higgs [send him mail] is senior fellow in political economy at the Independent Institute and editor of The Independent Review. He is also a columnist for LewRockwell.com. His most recent book is Neither Liberty Nor Safety: Fear, Ideology, and the Growth of Government
. He is also the author of Depression, War, and Cold War: Studies in Political Economy
, Resurgence of the Warfare State: The Crisis Since 9/11
and Against Leviathan: Government Power and a Free Society.
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Friday, September 17, 2010
Casey's Energy Guru: Today's Hottest Energy Plays
Casey Research
Marin Katusa, an accomplished investment analyst, is the senior editor of Casey’s Energy Opportunities, Casey’s Energy Confidential,and Casey’s Energy Report. He left a successful teaching career to pursue analyzing and investing in junior resource companies. In addition, he is a regular commentator on BNN and a member of the Vancouver Angel Forum where he and his colleagues evaluate early seed investment opportunities. Marin also manages a portfolio of international real estate projects. Using advanced mathematical skills, he has created a diagnostic resource market tool that analyzes and compares hundreds of investment variables. Through his own investments, Marin has established a network of relationships with many of the key players in the junior resource sector in Vancouver.
L: Today, we turn to one of the more interesting – and colorful – characters on our team, Marin Katusa. Marin’s bio neglects to mention that he is also the lead singer of a rock band called Era Flair. Why should investors listen to a guy who wears leather pants and plays an electric guitar? Because he’s a bloody genius, that’s why – and he’s dialed into these markets like no one else. So, Marin, what’s hot and how do you make money on energy today?
Marin: First, you have to realize that the energy sector is different from the metals and mining you focus on, Louis. Anywhere in the world, the copper you mine is just copper, and the gold you refine is gold. But take coal as an example. It’s not just coal – there are many different types: premium metallurgical coal; semi-hard coking coal; semi-soft coking coal; and even among the thermal coals – the cheap stuff you burn to make electricity – there are different categories that produce different amounts of ash, among other variables.
So, just because you have a coal deposit, that doesn’t mean you have a buyer who can use your coal.
L: Ah. Someone may have a power station nearby, but it’s not designed to burn the specific kind of coal you have… And the power station that can use it is too far away to make it economic to ship the coal there?
Marin: Exactly. Copper costs dollars per pound, but coal costs dollars per ton, so if you don’t have cheap rail nearby, or a user on site, you got nothin’. There are similar constraints on the natural gas business. You can’t just study the commodities, you have to study the markets from top to bottom, and often that means understanding the local users and forecasting their probable demand.
L: Even oil isn’t just one thing, right?
Marin: Right. There’s heavy and light, and refineries designed to process one type cannot handle the other. Proximity to pipelines and shipping is important too. So you really have to understand the characteristics of each type of each energy commodity, the logistics of getting these commodities to market, and the various end users’ differing needs.
L: A quick aside – are you looking at thorium plays? There seems to be some buzz on the street these days about thorium.
Marin: We’ve been following the thorium markets for five years now, and there is some buzz going around, so we’re working on a special report on the subject that should be out soon.
L: Can you give us a sneak preview?
Marin: It’s even more like what I was saying about the coal markets than uranium. You have to know who your end user is going to be. There was a Bloomberg article recently that suggested that the Obama administration could switch from uranium to thorium. But it’s not so easy; they are not the same thing, and there are trillions of dollars of infrastructure that would have to be changed over. Who’s the end user who’s ready to use your thorium? You have to know, or you have no project, whatever today’s price per pound might be.
L: Okay. So how do you make money across such diverse subsectors of the energy market?
Marin: By being very careful. Not only do you have a lot of homework to do.
L: When you were a professor, were you one of the ones who gave kids a lot of homework?
Marin: Hey, I didn’t make the markets this way, I’m just telling you what you have to do if you want to make money in them. And you can’t just let yourself get swept away by whatever the flavor of the day is, be it thorium, or coal, or what-have-you.
In fact, starting a few months ago, I was on BNN, telling viewers that certain coal companies that were currently very much in favor were overpriced.
Now, I do like coal, in the right company with the right market. The U.S. currently gets 50% of its power from coal-fired plants, so companies with deposits that can feed those plants are very interesting. But some of those metallurgical coal companies – they produce coal for making steel – were trading at over 25 x earnings. They were good companies, but that P/E implies an expectation of doubled production, or a three-fold increase in earnings, and that would be very difficult to deliver in short order.
L: Those are pretty high expectations.
Marin: The market really likes energy commodities right now. Money is flowing and wants to land in stocks of companies that are doing the right things. But I said to stay away from these stocks, even though the companies were good companies, because the market was simply overvaluing them. And in the last few months, they’ve corrected 40%.
L: Good call
Marin: The show’s host knows me, so he knew I wasn’t just looking for things to stay away from. He asked what my top pick at the time was, and I answered Cline Mining (T.CMK) but said that I hadn’t done my due diligence on the ground yet. Unfortunately, the stock shot up 80% after I mentioned it, so we didn’t end up recommending it. That just goes to show you how bullish the markets really want to be right now. If there’s any kind of good reason to expect a stock to do well, it’ll take off. So, I’ve narrowed things down to “best of breed” within each sector – that’s all I’m interested in right now. I think I’ve got such picks staked out in geothermal power, coal, and uranium. That’s what we’re going to be focusing on over the next two months in Casey’s Energy Report, especially in coal.
L: If you were right about those specific companies correcting, and they dropped 40%, did you make money shorting them?
Marin: Someone else might have, but not us. We don’t recommend shorting in the newsletter – it’s for retail investors, many of whom are not prepared to make short trades, nor to deal with the extra risks associated with them. When you short, you have to be right about more than which way a stock is headed; you have to time it right. If you make the right call, but your timing is off…
L: You still lose money.
Marin: Right.
L: So, there’s no one sector of the overall energy market that really floats your boat these days; it’s all about picking the gems out from the gravel?
Marin: Yes, that’s what I’m focusing on, not just for the newsletters, but for the funds I manage as well. I believe that if you invest in “best of sector” companies, you’ll be rewarded very handsomely, come what may in volatility along the way.
L: Can you give us an example? Or would that be giving too much away?
Marin: No problem. In the geothermal sector, there’s one stock I think is almost a textbook example of a great energy speculation. I’ve been out to inspect their operations in the field, I’ve met with management numerous times over the years, and now I’m making a big, big investment in it. The company is Nevada Geothermal Power (V.NGP, OB.NGLPF).
L: I remember covering them before we split the energy newsletter from the metals newsletter. It was always a good story, but the stock never seemed to take off. Why do you think it will now?
Marin: They’ve spent the last ten years building their plant – the largest geothermal plant built in the U.S. in the last ten years, and in Nevada, 25 years. They get tax credits for green energy and have power purchase agreements (PPAs) in place that give the project quantifiable value. This thing is so undervalued now, even by Graham & Dodd type analysis. It should be trading at about 94 cents a share, just for the existing assets and cash, but it’s trading around 50 cents. It could almost double, and you’d still get all the company’s exploration upside for free.
L: Sounds like a gem to me.
Marin: It is – it’s the only geothermal company we own in our fund. Do you remember the Casey conference last September, in Denver, when Ross Beaty was plugging his geothermal company, Magma Energy (T.MXY), and I said that it was a great company, but that it was overvalued at the C$2.00 price range it was trading at, at the time?
L: I remember. You had Ross and Rick Rule and Bob Bishop and Lukas Lundin there.
Marin: Yep. I told the audience to be patient and they’d be able to buy the stock under C$1.50, and they all said I was wrong, that the company was adding value and heading higher, but it did drop below C$1.50.
L: It’s close to a buck now, Canadian.
Marin: Right – so people need to be cautious. You can’t rush in, even when the story is great and has someone as phenomenally successful as Ross Beaty behind it. There are lots of fund managers out there who get paid based on realized gains, which means they get in and get out very quickly. Those are big positions, so this can put selling pressure on even the best stories. If you’re patient and really do your due diligence to determine what price it makes sense to buy at, and then wait for the market to come to you, you’ll do well.
L: Sounds good. But what would you say to our readers who’ve been seeing Doug calling for The Greater Depression and all our other bearish calls on the economy, and who agree with our analysis, but who’ve seen energy commodities decline when the economy slows down? They might be reluctant to invest in energy now, and how could anyone who thinks the global economy’s in trouble blame them?
Marin: Generally speaking, that caution is bang on target. Oil in particular is ripe for correction, as there are huge speculative positions in that market.
L: What do you mean?
Marin: Right now, in the U.S., China, and in certain countries in Europe, supplies are at all-time highs. Production is still going great, the pipelines are running at capacity, and not only are the onshore storage facilities running at capacity, the offshore tankers and such are as well. There’s even something Dr. Bustin and I discovered that we call the “invisible U.S. gas supply.”
L: How’s that?
Marin: Because of the way the new fracking technology works, there are thousands of wells that are basically being used as storage facilities. These resources don’t need to be put into production when they are tapped – they can be brought online in just a couple of days, so the companies can sit on them until they need them. It’s like a giant natural storage facility.
Meanwhile, all these funds looking for good investments have figured out that oil is one of them – and it is, but they’ve driven the prices higher than the supply and demand justify. We’ve calculated that the current price of a barrel of oil includes about $15 to $20 due to speculation alone.
L: So, the price of oil could drop by that much in a day or two, if the winds changed and these speculators decided to exit the market?
Marin: Yes. Think about what happened in the aftermath of the Deepwater Horizon disaster in the Gulf of Mexico. There went 25% of the U.S.’s domestic oil supply – boom, offline in a day. Now, normally, you’d expect to see the price of oil to increase, right? The supply drops, so the price rises. Basic economics. But it didn’t – it corrected almost 20% in that week. That tells me there were a lot of speculators in the field, and they panicked and got out. There’s just no other reason for the price to drop when supply became constrained.
L: So… How do you pick oil companies in such an environment?
Marin: We use $45 oil. If a company can’t make solid profits at $45 a barrel, we stay away. There are a lot of companies making good net-backs – the difference between their cost of production and the realized price per barrel – at $80 oil, but those margins dwindle, or turn negative, at lower prices. So, to see the true strength and value of an oil company, we use a much lower oil price. We’ve done very well in the newsletter, even on the bigger companies, using $45 oil as our yardstick for best of sector.
L: And if there is a big correction in the energy sector, you average down?
Marin: Right. The need for energy isn’t going away, and profitable companies on sale will make for spectacular investments at that time. For example, our oil-sands pick is definitely the best of sector. It’s not only the lowest-cost producer in the sector – oil sands being the largest source of unconventional oil in the world right now – but it has excellent growth potential. But we recommended waiting for a correction, telling subscribers to buy only under a certain price.
L: I imagine the company loved that.
Marin: We get a lot of heat for our “buy under” recommendations, just as you do, but we don’t work for the companies, we work for our subscribers. And in this case, we had to wait four months for our price guidance to be met, but the market did come to us, and our subscribers got in at much lower prices. That’s the beauty of it – it really works.
I like to tell investors that if they feel like they’ve missed the boat, they’ve missed the boat. You don’t buy a ticket after the boat’s left shore, you wait for the next one.
L: [Laughs] If you miss the boat, there’s no point in jumping; you’ll just get wet.
Marin: [Laughs] That’s right. You’ll just drown.
L: Anything new and exciting in the business?
Marin: I think tapping into new sources of unconventional oil and gas will continue spreading, especially into India and Asia. You know, we were the first research team to write about European shale gas. That’s become a big story now, but we beat the Merrill Lynches of the world to it. I think we’ll see more of that. Closer to home, depending on how the elections go in the U.S., I think American geothermal plays could become very hot.
I see a big consolidation coming in the geothermal sector. There are big players here, multi-billion-dollar companies, but they’re all private. You can’t play that way, but you can buy the up-and-coming companies they are likely to take over, like NGP and the others we follow.
Just remember to be very careful. These are speculative markets – the only money you should have in them is your high-risk money. And when you see solid gains, take profits and reduce your risk. To stay in this game, you need to recover your initial capital and add to it as you go, not risk it on dangerous “double or nothing” type bets.
L: Understood. Well, thanks a lot – some great insight into how to play the energy sector in today’s market environment.
-----
No one knows the energy sector better than Marin… and his cautious approach to high-risk/high-reward junior stocks has made exceptional gains for his subscribers, up to 100%... 300%... even 1,000% returns within 12-24 months. Try Casey’s Energy Report today risk-free, for 3 full months with 100% money-back guarantee. Click here for more
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