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 Thursday isn't just Thanksgiving, it is OPEC meeting day. On November 27th, between touchdowns and turkey sandwiches, keep an eye on news out of Vienna where OPEC will be meeting. This meeting will push oil prices either higher or lower, depending on what members decide to do with production.
Key to OPEC's decision making process is how do they react to America's continued resurgence in oil production.
There is a lot of speculation about the decline in oil prices and the effect on oil companies. In the short-term there is really only one thing we should be thinking - "how big is the opportunity in oil stocks going to get?"
The use of oil is slowly drifting upward and will for at least another decade. While supply is at the high-end of the range right now, it is also clear that is a temporary situation.
I don't make recommendations to folks about asset allocation unless they are an advisory client, so, take this for what it is, my thoughts on where the market is and what I'm doing about it for clients.
I discussed a few weeks ago on MarketWatch the opportunities that algorithmic traders are giving you. Because they are by definition trend traders, they are piling on in whatever direction markets are moving. Right now, they are piling on the S&P 500 and a few sectors to the upside. They are selling short energy and driving it.
In my opinion, neither makes much sense. From a mathematical standpoint, the large caps are very overextended. There is a divergence with smallcaps that's been going on much of the year that's not usual, except for the end of bull markets. It's hard to say how close we are to the end of the this rally, but I'd say we are no earlier than the 7th inning of a 9 inning or extra innings game. We might in fact be in the 9th inning, it's very hard to say given the incredible amount of intervention by the central banks.
Here's an important chart:
Over the past several months, the dollar has become stronger against most other currencies. In particular we have seen rises in value of the dollar versus the Japanese Yen and European Union's Euro. This is a trend we must respect and expect to continue.
I talked about the impending strength of the dollar in a series of articles I wrote in 2012 on MarketWatch:
Two Problems for the Dollar which was essentially a set-up of dollar bears.
Dollar Strength Beyond the Balance Sheet which laid out the case for a stronger dollar.
Opportunity in a Re-emerging America which discussed some of the spots to invest.
If you haven't read Currency Wars yet, good grief, buy that book. It is imperative to understanding why what is going to happen is going to happen. There is a link on the right of our front page.
The Dollar Run Begun
Over the past couple quarters the dollar has gotten stronger vs the G-10 currencies. This is the start of a dollar movement up that will be broad based, but volatile as it moves up and to the right.
In his Bloomberg article The Secret Goldman Sachs Tapes, Michael Lewis (Liar's Poker, The Big Short, Boomerang, Flash Boys) outlines the complete breakdown of the Federal Reserve's regulation of the big banks, in particular Goldman Sachs. The article discusses The Secret Recordings of Carmen Segarra, a former Fed regulator, which were documented in the This American Life radio show on September 26th. If you ever had any doubts about the cozy relationship between the big banks and The Fed, well, you shouldn't anymore. This is "must listen" stuff.
The meat of this letter will focus on a different structural issue. Federal Reserve Chairperson Janet Yellen recently openly wondered whether the slow growth economy was structural in nature and not cyclical? As I have discussed on MarketWatch in brief and quarterly letters at my firm website, I have a one word answer for her query: YES.
I wrote this article for one of the best new financial websites out there. It is very appropriate for what we do here which is longer-term trading and investing.
I know a lot of people are convinced that they can swing or day-trade the markets to get rich. In a few cases that's true, I will make that concession up front. For most people though, it doesn't hold up. Most folks who attempt to day or swing trade fail to beat the markets and quite a few lose dramatically in sudden wipe-outs.
There is a simple calculus at work here. The more decisions you are making, the less likely you are to be right enough of the time to make the work worthwhile. In fact, most of the work you are doing, probably wasn't enough to get all the work done well, so many of your decisions are made on sparse knowledge, an emotional belief in a vulnerable system (think of a gambler) and gutting it out of desperation.
In addition to the mathematical and emotional problems of frequent trading, there is another obstacle to making enough money to be worth the time of trading frequently. There exists a very professional group of sophisticated traders that most "regular" folks are not a part of. Those "pros" for the most part wax the small folk's back side on a regular basis. It's not necessarily because they are smarter, but they are more connected, more experienced, better heeled, less honest and, in many cases, more ruthless than folks at our end of a nice two screen set-up in a spare room.
With the correction in full swing I have been looking for stocks that might benefit from the decrease in oil and natural gas prices - quickly. With lower prices at the pump and hopefully less expensive late autumn heating bills I am anticipating that some of the companies you would normally expect to bounce around the holidays might have unusually sold off this month. I found three companies that are likely to do very big business this holiday season that have absolutely spectacular balance sheets.
The first company is in the same business that made Michael Jordan an even richer man. The next one is a hit among teens and young adults who need something that really fits around their hips. And finally, I have a Carl Icahn favorite that you probably have an account with already.