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Old 04-03-2011, 11:02 AM   #21
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Here's the paradox for me: Let's assume your analysis is spot on. That's fine, but the second part is - we need to assume that "the market" hasn't already fully priced those expectations into the stock price. Heck, the market may have over-priced the expectations. So the paradox is that a seemingly good investment could become a bad investment if the market got in ahead of us.

Maybe you also feel that the market hasn't priced this in, but that does require two things to be right - the energy analysis and the stock price analysis. I tend to not be very confident that I can get both right very often (and I'm usually right about that!). Obviously, YMMV.

-ERD50
Absolutely correct. If you don't feel you can call it, stick with index funds.
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Old 04-03-2011, 06:27 PM   #22
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I am reading the "The Age of Deleveraging" by A. Gary Shilling.

He believes we are facing a decade of world-wide deleveraging and that deflation is more likely than inflation. Some interesting statistics. During wars : inflation After wars: deflation.

One of the investments he recommends is North American Energy.... just about all aspects of it. He believes petroleum and natural gas will be good bets.


He also thinks health care because... well you already know why.

Productivity enhancers... and technologies (anything) that increases productivity... increase profits in a slow growth economy.

Makes sense to me.
I read Shilling's book and didn't find the case for deflation to be that persuasive. As a contrast, David Skarica's "The Great Super Cycle" makes the case for inflation. Skarica's thesis is that whenever debt levels in an economy get too high, rather than implement painful and unpopular spending cuts, governments will print money creating inflation. He points to recurring historical patterns to support his view. I don't agree with everything Skarica writes, but am inclined to agree that inflation is more likely than deflation at this point - tax inreases alone will not get the deficit under control and the political will to reduce spending sufficiently simply does not exist. For the last few years, most of the world has experienced persistent and rising inflation (especially in items which can be viewed as necessities or near necessities - food, health care, education, transport.
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Old 04-04-2011, 04:23 AM   #23
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My brief comment did not do the book justice...

The context of my comment was more focused on energy... I threw that comment in because it seems to support the general consensus in the thread about the direction of energy. (whether the general economic trend in the US is toward inflation or deflation).


At a Macro level he thinks we are more likely to experience low growth and deflation. But he is not suggesting massive deflation... or deflation everywhere. In fact, there are areas that will experience growth (more demand than supply) and inflation.

As most of us know (in our own professions) The real world is not as simple as a general statement.
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Old 04-04-2011, 05:12 AM   #24
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The context of my comment was more focused on energy... I threw that comment in because it seems to support the general consensus in the thread about the direction of energy. (whether the general economic trend in the US is toward inflation or deflation).
Agree. Interestingly, both authors are keen on energy as an investment theme. Given that world wide consumption is still rising, the issue is which sub-sectors will be the best bet and, within sub-sectors which companies.

While I appreciate the deleveraging arguement, I'm still in the inflation camp.

A lot of countries are already seeing their inflation rates rise - South Korea's just hit 4.4%, UK is over 4%, Hong Kong's is currently 3.6% but is expected to be between 4-5% this year. I'm seeing very real increases in our cost of living - the kindly HK government, in spite of running a massive surplus, just hit me with a 10% increase in rates (property tax), the school fees for my oldest daughter will go up by about 9% next school year, our grocery bill is way higher than last year, the price of the airtickets for our annual trip home are more than 50% higher than in 2005 etc etc. It's hard to believe in deflation in this environment - with or without deleveraging.

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As most of us know (in our own professions) The real world is not as simple as a general statement.
Absolutely agree.
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Old 04-04-2011, 08:40 AM   #25
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Agree. Interestingly, both authors are keen on energy as an investment theme. Given that world wide consumption is still rising, the issue is which sub-sectors will be the best bet and, within sub-sectors which companies.




Absolutely agree.
I agree with both authors that energy is a good investment theme. However, I don't want to add additional risk (beyond sector risk) by narrowing my investments to sub-sectors or individual companies. This is why I'm staying with VGENX and VDE.
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Old 04-04-2011, 03:33 PM   #26
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I think I'm late to the energy party. Last time oil hit $140, the world economy went into the dumper, precipitating the Great Recession. A look at VDE's chart indicates we at levels similar to just before then...

VDE Basic Chart | Vanguard Energy ETF Stock - Yahoo! Finance
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Old 04-04-2011, 05:14 PM   #27
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I think I'm late to the energy party. Last time oil hit $140, the world economy went into the dumper, precipitating the Great Recession. A look at VDE's chart indicates we at levels similar to just before then...

VDE Basic Chart | Vanguard Energy ETF Stock - Yahoo! Finance

If $140 is the mark... there is still quite a way to go. It is about a 30% increase from today's price on light crude.
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Old 04-25-2011, 04:05 AM   #28
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Although earnings have probably been priced in... the windfall will begin showing up in the bottom line.


Quote:
Booming crude-oil prices and improved refining profits are poised to put a firecracker under Big Oil's first-quarter earnings and set the stage for a year that could come close to rivaling the industry's record year in 2008.
Energy Earnings Prepare for Liftoff - WSJ.com

If more retail investors take notice... maybe it could turn into the big MO.

The party always ends sometime. Still contemplating keeping it tactical timing.... I could always... ride the wave, get off before the tide goes out, look for the next big wave....
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Old 04-25-2011, 06:21 AM   #29
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I agree with both authors that energy is a good investment theme.
Although DW/me have a good deal in companies such as Chevron, ExxonMobil, et al we do so as part of our funds - we don't hold individual companies. These oil companies are part of our FUSEX, FEAIX, FPURX, VWIAX, and FBALX, for example.

While these holdings have "risen to the top" in value of our holdings, we also realize that their gains are offset by companies in the funds we hold - that are impacted to their transport costs due to the increase in price (and perceived profits).

It's more of a balancing act. Take some; give some. In the end (for broad based investors, as we are) it seems to be a wash.
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