By Craig Reger
“That isn’t a torpedo is it”? — Unidentified passenger of the Lusitania, 1915.
For some reason the Lusitania passengers and Cunard Cruise Line Management ignored the Germans verbal and written threats that passenger cruise ships were fair game during World War I. At some point, the over-extended world equity markets will be torpedoed and many passengers will say, “why didn’t I listen to the obvious threats”? The equity markets continue to extend and exceed all reasonable expectations at this point, while the bond market is beginning to see weakness. Bond traders should not be ignored. Know your time-frames. Once an equity pull-back does occur, markets probably continue to build on the current momentum, as this bull market looks like it has legs.
One sector that I thought would out-perform and is still reasonably priced, is the energy sector. Now that world markets are eating sugar directly from sugar packets and not mixing into decaf coffee first, finding reasonably priced stocks to protect against the eventual and sudden downturn is important, and energy companies are presenting that opportunity.
XLE, the energy select Spider ETF is a good proxy for many energy names that are showing strength this past month. This includes a few solar energy companies that are showing price momentum as well. The strength of these stocks lies in the volume of shares traded, and volume is picking up, which shows institutional interest.
Maybe certain energy companies are rising because the demand pull on the electrical grid for mining crypto currency? It is quite a phenomenon to watch the rise and fall of many of these online currencies. I have not been immune to the allure myself, but I have learned I would rather sleep at night than think about the price of Ethereum.
Coal energy was once used to power the Lusitania and now coal may come back in vogue to help supplement the energy vacuum created by rising energy grid demand due to crypto currency mining.
In the long run, I suspect all crypto currency is not any different than the Lusitania.