Monday, October 13, 2008

A Flashback to the Future - Its Energy!

Don't be fooled by the unwinding of energy trades in what was the worst year since 1933. Don't let it cause you to forget the prices you saw at the pump or of the USO or Natural Gas. Don't forget because one thing hasn't changed, just the date of arrival - Oil prices will go back up. Natural gas prices will go back up, they have to.

The law of numbers is on the side of energy. More people is just the start - more cars, more lights, more plastic containers. All the Kool-aid that everyone was drinking is still there. What makes this important is actually recent events - because they've shown you how the future will again begin to play out. None of the risks to global energy supply have subsided and alternative energies still won't be ready or sufficient to handle the probelm when people soon wake up and realize that world growth is the problem.

Now all of this sounds quaint, but the most important rider to this argument is that now when the stock market is putting energy stocks on sale, their dividend yields are highest, and their growth in the long run is inevitable.

So, if you've been jealous of the runup and missed the first prospectors showing you a glimpse of the future of energy markets, take this time to establish a profit base from their excessive greed in bidding the markets up.

Here are a couple, all at attractive levels:

BP, BPT, PGH, ECA, CHK, XOM

Now for a reality check - going into a recession where would you rather put your money? I'm not betting on the financials as they become more regulated and consumers remain frugal in the face of recent debacles. Risk taking will again be taboo. The only low risk thing I see is collecting 5-10% dividend to wait for more people to be born around the world, more cars and lights to increase energy needs. these and other energy stocks might just be the last "buy and hold" stocks left.

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