Too late to buy energy ETF?

wildcat · 03-05-2005, 04:46 PM

I hate to buy when sectors are hot but I wanted to get the opinion from others on the ER forum. I have been watching the Vanguard Viper Energy for a little while but the question is will oil (accounts for the majority of the ETF) stay high or go higher? Is the supply really tight? Also will energy be a good hedge in a time of higher inflation (seems like it b/c it contributes to higher prices)? I also cranked some data and found the returns of energy related stocks to only be slightly positively correlated (.21) with the S&P over a 10 yr period. Thoughts? Concerns? Ballyhoo?

charlie · 03-05-2005, 05:25 PM

wildcat,

Do you see anything on the horizon which will
crater oil prices in the near future? There is a
"terrorism" premium built into the price that
could evaporate if a lot of things go our way
in the mid-east .... but that's a big if. Even if
the terrorism premium goes away, I don't think
we will ever see unprofitable oil prices again.
The demand from China and India and decreasing
reserves all push up the price.

I have been asking myself the same question
and have decided to start putting my toe into
the water. This is an asset class that, IMHO,
should help fight inflation in the long run.

Cheers,

Charlie

Nords · 03-05-2005, 05:33 PM

I say again, consider the link between rising energy (& commodities) and the dropping dollar.

Energy ETFs sound like a good deal but most investors back away from currency contracts, no?

Your judgment may be sound but you may also be swimming upstream against market sentiment. With the Dow closing at its highest level in 3+ years and about to break 11K (plus our retirement portfolio rising to its highest value since 1999) I'd hold off for a pullback... like early 2006!

charlie · 03-05-2005, 06:53 PM

Nords, when I said "toe in the water" I ment just
that .... DCA over a 3 year period or plunge when the
market craters .... whichever comes first. Last
year I was asking the same question about
REITs and made my initial investment just before
the big dip in the spring at which time I went all in.

Cheers,

Charlie

Spanky · 03-05-2005, 08:12 PM

Quote:

With the Dow closing at its highest level in 3+ years and about to break 11K (plus our retirement portfolio rising to its highest value since 1999) I'd hold off for a pullback... like early 2006!

Tt seems to make sense to buy during a pullback. Does it also make sense to sell before the pullback? Why wait until 2006?

Spanky · 03-05-2005, 08:15 PM

Charlie,

Many experts suggest that most REITs are overpriced. Have you thought about selling them before a major pullback?

Spanky

brewer12345 · 03-06-2005, 09:10 AM

Personally, I think commodities are likely to be a better overall inflation hedge than energy. That is one of the reasons I am in PCRDX instead of QRAAX: the DJ-AIG index that PCRDX follows is limited to 1/3 energy (the rest is other physical commodities), while QRAAX follows the Goldman Sachs index, which is mostly energy-based. QRAAX may have more spectacular returns lately, but it is more volatile and less highly correlated with inflation than PCRDX. I would imagine that energy companies would have similar drawbacks.

charlie · 03-06-2005, 04:39 PM

Spanky, I sold some in the fall after the big run up and
again in January to get back to my allocation. I will
bring my allocation up to snuff again probably next
January.

I am in REITs for the long haul now and won't sell
everything.

Cheers,

Charlie

Stephen_C · 03-12-2005, 07:19 PM

I confess up front that I am an energy bull for the long term. (But, as Charlie notes, its is both an volatile industry and one with seasonality.) It is also a truly difficult industry to really understand; as soon as you think you've got a good grasp, something new develops. However, at the end energy (and oil more specifically) is a core segment of my portfolio. The basic reason is that worldwide demand is increasing, and supply is decreasing. Beyond that, as I believe the USD is weak, oil is a good currency hedge. I generally ignore day to day movement in oil prices and look at the trend underlying. (The underlying industry is not priced at $55/BBL oil.)
I do not generally buy funds, but rather individual stocks - the vast majority being dividend payers. If you like REITS, you might want to look at some of the MLPs - but like REITS they are somewhat interest sensitive.

03-05-2005, 04:46 PM	#1
wildcat Thinks s/he gets paid by the post Join Date: Feb 2005 Posts: 1,906	Too late to buy energy ETF? I hate to buy when sectors are hot but I wanted to get the opinion from others on the ER forum. I have been watching the Vanguard Viper Energy for a little while but the question is will oil (accounts for the majority of the ETF) stay high or go higher? Is the supply really tight? Also will energy be a good hedge in a time of higher inflation (seems like it b/c it contributes to higher prices)? I also cranked some data and found the returns of energy related stocks to only be slightly positively correlated (.21) with the S&P over a 10 yr period. Thoughts? Concerns? Ballyhoo? __________________ "These walls are kind of funny. First you hate 'em, then you get used to 'em. Enough time passes, gets so you depend on them"

03-05-2005, 05:25 PM	#2
charlie Thinks s/he gets paid by the post Join Date: Mar 2004 Location: Dallas Posts: 1,082	Re: Too late to buy energy ETF? wildcat, Do you see anything on the horizon which will crater oil prices in the near future? There is a "terrorism" premium built into the price that could evaporate if a lot of things go our way in the mid-east .... but that's a big if. Even if the terrorism premium goes away, I don't think we will ever see unprofitable oil prices again. The demand from China and India and decreasing reserves all push up the price. I have been asking myself the same question and have decided to start putting my toe into the water. This is an asset class that, IMHO, should help fight inflation in the long run. Cheers, Charlie

03-05-2005, 05:33 PM	#3
Nords Moderator Emeritus Join Date: Feb 2004 Location: Oahu Posts: 15,999	Re: Too late to buy energy ETF? I say again, consider the link between rising energy (& commodities) and the dropping dollar. Energy ETFs sound like a good deal but most investors back away from currency contracts, no? Your judgment may be sound but you may also be swimming upstream against market sentiment. With the Dow closing at its highest level in 3+ years and about to break 11K (plus our retirement portfolio rising to its highest value since 1999) I'd hold off for a pullback... like early 2006! __________________ * * For more info see "About Me" in my profile.

03-05-2005, 06:53 PM	#4
charlie Thinks s/he gets paid by the post Join Date: Mar 2004 Location: Dallas Posts: 1,082	Re: Too late to buy energy ETF? Nords, when I said "toe in the water" I ment just that .... DCA over a 3 year period or plunge when the market craters .... whichever comes first. Last year I was asking the same question about REITs and made my initial investment just before the big dip in the spring at which time I went all in. Cheers, Charlie

03-05-2005, 08:15 PM	#6
Spanky Thinks s/he gets paid by the post Join Date: Dec 2004 Location: Minneapolis Posts: 2,800	Re: Too late to buy energy ETF? Charlie, Many experts suggest that most REITs are overpriced. Have you thought about selling them before a major pullback? Spanky __________________ May we live in peace and harmony and be free from all human sufferings.

03-06-2005, 09:10 AM	#7
brewer12345 Give me a museum and I'll fill it. (Picasso) Give me a forum ... Join Date: Mar 2003 Posts: 9,362	Re: Too late to buy energy ETF? Personally, I think commodities are likely to be a better overall inflation hedge than energy. That is one of the reasons I am in PCRDX instead of QRAAX: the DJ-AIG index that PCRDX follows is limited to 1/3 energy (the rest is other physical commodities), while QRAAX follows the Goldman Sachs index, which is mostly energy-based. QRAAX may have more spectacular returns lately, but it is more volatile and less highly correlated with inflation than PCRDX. I would imagine that energy companies would have similar drawbacks. __________________ “When you realize that you are one of the rare few who observe moral principles in their relationships with others, there is a temptation to sink into amorality, not out of conviction or pleasure but simply to avoid further pain, because there is no greater suffering than being an angel in hell, whereas a devil feels at home wherever he goes.” – Martin Page, How I Became Stupid

03-06-2005, 04:39 PM	#8
charlie Thinks s/he gets paid by the post Join Date: Mar 2004 Location: Dallas Posts: 1,082	Re: Too late to buy energy ETF? Spanky, I sold some in the fall after the big run up and again in January to get back to my allocation. I will bring my allocation up to snuff again probably next January. I am in REITs for the long haul now and won't sell everything. Cheers, Charlie

03-12-2005, 07:19 PM	#9
Stephen_C Dryer sheet wannabe Join Date: Jan 2004 Posts: 11	Re: Too late to buy energy ETF? I confess up front that I am an energy bull for the long term. (But, as Charlie notes, its is both an volatile industry and one with seasonality.) It is also a truly difficult industry to really understand; as soon as you think you've got a good grasp, something new develops. However, at the end energy (and oil more specifically) is a core segment of my portfolio. The basic reason is that worldwide demand is increasing, and supply is decreasing. Beyond that, as I believe the USD is weak, oil is a good currency hedge. I generally ignore day to day movement in oil prices and look at the trend underlying. (The underlying industry is not priced at $55/BBL oil.) I do not generally buy funds, but rather individual stocks - the vast majority being dividend payers. If you like REITS, you might want to look at some of the MLPs - but like REITS they are somewhat interest sensitive.

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