Kirk Spano was tabbed "The World's Next Great Investing Columnist" by MarketWatch of the Wall Street Journal network in 2011. He has written for Motley Fool, Seeking Alpha and been widely distributed by various newswires, brokerage feeds and on Morningstar. As one of the first to identify the developing resource boom in America, Kirk has been able to pass on stellar returns to his investors and subscribers. He has appeared on Fox Business and made regular appearances on the radio. Mr. Spano is the founder of Bluemound Asset Management a fee-only Registered Investment Advisor.
This past week the markets rallied on below average volume. While many momentum investors underplay the idea of volume, to me it tells a very important tale.
Because 70%-90% of market activity in any period is typically large investors, when volume is low, that means big investors at a minimum are abstaining from buying. That is a bad sign for retail (small) investors, typcially including mutual fund and self-directed investors.
Well my birthday week was good for the domestic markets as most ended up about 3% bringing us back to near the even line for the year. So far in 2015, we have had the type of volatility that I foreshadowed back in my October and January letters to clients of my firm and my opening letter on MarketWatch this year. In those articles I went over investments to avoid and asset allocation thoughts.
As I sit in my Green Bay Packers t-shirt at my keyboard I am still quietly lamenting that I will not be watching my team in the Super Bowl today. There is some consolation, I do like Russell Wilson, I have friends from Boston who will feel good if the Pats win and at least I'll get to hear Katy Perrry Roar even if I can't see a Packer score.
Anyway, there was a lot going on this week. The markets continued to be volatile and we finished with a down month in January which a lot of people take to mean there will be a down year in the markets. I'm not so sure about that yet, but I do see at least a 2011 type year shaping up and maybe worse, although that is far from the type of certainty I like to invest in.
Special Note: "A Peak Oil Plateau Special Report: The Last Great Chance to Buy Oil & Gas Stocks" will be updated as soon as earnings are complete and I have reviewed the hedging and finances of the companies. I will be adding three or four new companies, as well as, possibly taking one off of our prior list. The working title for the new updated piece will is: The Last Great Chance to Buy Oil & Gas Stocks - The Dirty Bakers Dozen
On June 5th in MarketWatch I suggested that a developing Peak Oil Plateau would lead to range bound oil and natural gas prices for a long time, with only occasional drops or spikes outside of that range. I also said that by the end of 2014 we would see oil prices drop substantially:
"I believe there is a high probability that we do move to the low end of the oil-price range later this year..."
Since then, the price of oil has not only dropped to the low end of the range, but it has embarked on one of it's rare collapses below its sustainable range. In early June, the price of Brent crude was about $108 per barrel. Today the price of Brent is hovering near $58 per barrel, far below the $80 to $120 range that I identified.
With oil and oil stocks crashing right now, our decision to be light oil stocks since summer time has proven to be very important. A month ago when I talked about asset allocation was also good for us, as hopefully everybody moved to at least 25% cash holdings. Now we need to focus on the dominoes that could still tumble with oil.
With the addition of some algorithmic analysis to our approach we can look for better entries. Subscribers will see on our current "much own" stocks update that only a few companies are good buys right now despite the lower prices from just a month ago.
In coming weeks and months, I believe it is very likely that we get financial crisis pricing on many of the oil & gas and oil & gas service stocks we have targeted.