Below is an article I wrote Thursday for Seeking Alpha. It discusses implications of falling oil prices on a long-term portfolio. Enjoy
Over the past few months the price of Brent Oil has fallen from around $114 to $84 per barrel. At the same time, West Texas Intermediate (WTI) has fallen from $104.5 to $82 per barrel. Some investors will tell you the reason is because the world is on the cusp of another great depression. Others claim the cause is the strengthening US dollar. Personally, I think they’re both right, but the biggest cause is that the growth of global demand is slowing… at the same time that global oil supply is surging. That’s right, I think the decline is no more sinister than simple economics. Increased supply, plus steady (or weakening demand), means lower prices. The purpose of this article isn’t to debate such points, however. The purpose of this article is to look at possible ways to profit from the recent decline, and more pointedly how the decline will affect my portfolio.
One of the most straight-forward ways to profit from the decline, is to invest in the energy sector directly… either long or short. I wrote an article forIncomeSurfer.com earlier this week, discussing the direct implication the fall of oil is having on the energy sector’s various subsectors. Some energy subsectors, such as alternative energy, I wouldn’t touch with a 10-foot pole. Others such as super majors or specialty services companies, warrant serious consideration. If you are interested, check out the article above.
To continue reading on SeekingAlpha.com, click THIS LINK.
In our modern age it can be tough to be frugal. There are a lot of forces encouraging us to buy and spend. The modern advertising and retail industries are wholly based on the getting us to each spend more time and money. Sometimes it can be hard to resist such messages, especially when our coworkers (or neighbors, families, etc) seem so much happier than we are. They have concerns and struggles too, but we can’t see them from the outside. So maybe if we bought the same stuff they have……we will be happier with ourselves. Go on, buy it….. “I deserve it”…..we tell ourselves in a predictable attempt to justify such wants.
This past weekend I was sitting in church. My mind was beginning to drift during the sermon (or homily depending on your religious bent). I was thinking about my “to do” list, which I have a bad habit of doing…..when it hit me. BAM! Contentment. The pastor was talking about contentment. Sometimes at church I hear something that I know I need to hear, at that moment, at that time…..and this was one such occasion. Continue reading
Background and Theory
For the past 6 months I have believed the price of oil was too high to be sustainable in the near term, and written about it on several occasions. Now that oil prices have declined substantially, I think those declines may prove to be an opportunity for investors. As a recap, WTI (West Texas Intermediate) has fallen from $104.5 to $85 per barrel in the past 4 months. Brent Crude has also fallen substantially, from $114 to $89 per barrel in the same time frame. (As a note, oil is traded internationally in US dollars.) Continue reading