Oil And Trump Both Need To Pause And Catch Their Breath

Adam Feik - INO.com Contributor - Energies

Oil has come a long ways, in really short order, rising from $26.21 on February 11 to over $38 as of March 31 (a 46% increase).

Hedge funds have become “as bullish on crude as they’ve ever been, according to the latest CFTC data,” said CNBC’s Melissa Lee on Wednesday.

Is the bullishness justified? Let’s try to sort all this out.

To start, here’s video of a Lee’s and Timothy Seymour’s CNBC interview of PR Advisors founder Robert Raymond. To me, Raymond’s analysis makes a lot of sense. See what you think. I’ve excerpted several statement from Mr. Raymond, followed by my comments (labeled Feik) to give you my view.

Raymond: “(The bullishness) is actually part of what has us concerned.”

Feik: I agree. John Templeton provided a favorite investing maxim of mine (and of many others) when he said, “Bull-markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.” With so many people trying to bottom-fish in oil and energy right now, I don’t see the kind of pessimism or skepticism that sparks bull markets. So, like Mr. Raymond, that has me concerned. Continue reading "Oil And Trump Both Need To Pause And Catch Their Breath"

WSJ Takes A Leap Too Far In Assigning Causation To Energy Sector Valuations

Adam Feik - INO.com Contributor - Energies

The WSJ Morning MoneyBeat blog post for Tuesday, March 22, was entitled, “Energy Stocks Are the Most Expensive in S&P 500.”

Are they really?

As I read the WSJ’s post, I decided I really have to use this as an opportunity to help dispel some widely – nay, almost universally held – notions about using P/E ratios to predict stock price movements.

How Not To Use P/E

Almost all investors, in my experience, routinely fall into the trap of misusing the P/E. In fact, I admit I fell into the same bad habit for many years myself. Until a couple of years ago (more on that later).

Don’t get me wrong. It’s not that the ratio can’t be useful. On the contrary, when properly interpreted, P/E can be an indication of sentiment, which is always important for an investor to understand. When P/Es are low (remembering to mentally adjust absolute P/E figures to account for differences in interest rates, inflation, and other market conditions in order to accurately assess whether P/Es are truly “low” or not), sentiment is probably somewhat sour, generally speaking. High P/Es (all things considered) generally mean investors feel willing to “pay up” for earnings, growth, dividends, and/or other perceived benefits of owning stocks. And again, having a feel for what the market’s sentiment is can be helpful (often in a contrarian sort of way).

Beyond the ratio’s use as a rough sentiment gauge, however, I’ve learned several things in the last couple years about using (or misusing) P/E ratios (for individual stocks and for the broad markets), which I’ll summarize as follows: Continue reading "WSJ Takes A Leap Too Far In Assigning Causation To Energy Sector Valuations"

Applying More Logic To Oil Prices

Adam Feik - INO.com Contributor - Energies

I wrote last week about applying some logic to the oil crash, which as of January 20th had taken prices below $27.

It seems like ever since the very day I wrote the article (January 20th), a lot more "logic" has seeped into energy markets, as oil has quickly rebounded to around $34 (I'm sure my article had something to do with that; ha ha).

Could things possibly be stabilizing somewhat?

I know oil prices can always be volatile, but surely the crash that's taken prices from $107 to $27 can't continue forever. So what's next? Continue reading "Applying More Logic To Oil Prices"

What's Next For Oil? Use Logic

Adam Feik - INO.com Contributor - Energies

All right. Now we've tried everything. And we still can't figure out when oil prices will finally turn around – or at least stabilize.

Experts' predictions are all over the map. Smart people – including analysts, industry executives, and entrepreneurs – are on both sides. Many predict even lower oil prices before the market steadies itself. Many others predict oil in the $40-60 range again as soon as the 2nd half of 2016. Both groups have applied rigorous study and analysis. Both have valid, compelling points.

Yet, the more I listen, the more confused I become. Meanwhile, oil prices continue falling like a knife. What's truly causing this massive, slow-moving train wreck from $107/barrel in June 2014 to $27/barrel 19 months later?


Recently, many pundits and experts seem to be speaking in a refreshing new language. It sounds a lot like logic and common sense. I've heard a ton of commentary lately that makes me go "hmm, that seems logical." Today I'll summarize a selection of these observations, and add a few musings of my own.

We've tried everything else. Let's try applying some logic to the situation. Continue reading "What's Next For Oil? Use Logic"

2016 Outlook For MLPs And Pipelines

Adam Feik - INO.com Contributor - Energies

I suppose my 2016 outlook for MLPs and pipelines should begin with a mea culpa about something I wrote earlier in 2015. On September 24th, I wrote:

“I generally regard pipelines as being a historically defensive area of the stock market, comprised of relatively steady, fee-for-service businesses. (Pipeline companies’ stocks) may be receiving undue punishment in the midst of the oil crash of the past 15 months. (Their) prices are down about 16% since June 20, 2014, compared to nearly a 38% decline for the overall energy sector, and a 63% crash in oil prices.”

The First Trust North American Energy Infrastructure ETF (EMLP) closed at $22.17 that day; and while EMLP did rise to nearly $24 over the next couple weeks, it then plateaued in October and plunged below $20 again by December 4th. It closed Tuesday at $20.15.

I regret having used adjectives like “defensive” or “steady” to describe these stocks. The past 7 or 8 months have certainly demonstrated otherwise!

The jury is still out on whether these stocks are “receiving undue punishment,” though. Perhaps 2016 will provide the verdict on that. Continue reading "2016 Outlook For MLPs And Pipelines"