Look at this chart — and just try not to salivate. It shows the performance of the Energy Select Sector SPDR Fund (XLE), a diversified ETF that holds 47 leading oil and gas drillers, refiners, and energy services firms …
How much is XLE up year-to-date? Around 15.5 percent. And how does that compare with the Standard & Poor’s 500 Index? Well, since the S&P 500 is up about 7 percent, the XLE is returning more than twice as much!
|Dow||-9.82 to 16,937.26|
|S&P 500||-.26 to 1,962.61|
|Nasdaq||+.64 to 4,368.68|
|10-YR Yield||-.001 to 2.623%
|Gold||+$1.40 to $1,318
|Crude Oil||-$.66 to $106.17|
So what’s driving this dramatic outperformance in energy shares? Take your pick of forces:
- The geopolitical turmoil in Iraq, Libya, and elsewhere — I covered this in detail in my Money and Markets column from June 13. Suffice it to say that with ISIS rebels threatening oil-producing regions in Iraq … Libya having trouble producing as much oil and gas as it did in its pre-revolutionary days … and simmering tensions in other places like Russia and Ukraine … energy traders are nervous. They’re building a larger fear premium into the market, helping drive energy prices higher.
- The surge in domestic production — While oil-producing countries in Africa and the Middle East are struggling with geopolitical turmoil, the U.S. is in the midst of a massive energy renaissance.
- The need for inflation protection — The Federal Reserve’s nonchalance over the risk of rising prices is causing investors to scramble for inflation protection. They’re buying gold and gold stocks, and they’re dogpiling into other commodities and shares of commodity-levered companies. That includes energy drillers, shippers and refiners.
We’re finding billions of barrels of oil and billions of cubic feet of natural gas in new locations, and extracting ever-higher amounts of energy from older fields. That, in turn, is being reflected in the share prices of companies reaping a windfall from that new production.
|The U.S. is in the midst of a massive energy renaissance.|
After such a major move, energy stocks could take a breather at almost any time. But rather than flee if we get a correction, I’d look to take advantage of it.
Look, the long-term forces driving energy stocks are not going away. So buying something like the XLE on any decent pullback makes a lot of sense to me. Or you could consider investing in the energy sector’s cream of the crop — the top-rated energy stocks I’ve zeroed in on in my Safe Money Report.
“The long-term forces driving energy stocks are not going away.”
One of my favorite picks is making out like a bandit because it helps energy companies ship oil and other products by rail. It has almost doubled in price since I first recommended it last October. Another highly rated energy company is vastly expanding its pipeline and storage business to capitalize on the domestic production boom. It has surged by a third just since November!
Click here or give us a call at 1-800-291-8545 to find out how you can get on board with those kinds of gains.
What about you? Are there particular energy stocks you like? Which names have delivered the most profit to you, or do you think will outperform in the weeks ahead? By all means, hop on over to the comment section and share with your fellow investors!
|OUR READERS SPEAK|
Yesterday’s piece on the mega-banks and the mega-fines they’re coughing up around the world really struck a nerve. Many of you were outraged at their behavior I chronicled, and believe that even-stiffer penalties for wrongdoing are the only way to tame the banking cabal.
Reader Anthony G. wrote: “The crony global capitalism is outrageous. The corruption is paid for by taxpayers. The Federal Reserve should be stopped from bailing out the bankers.”
And Reader James K. added: “Absolutely no question the large banks are systemically corrupt, feeling they can behave according to their own rules. THE question is why some of these folks are not doing jail time, as they have committed offences that would see lesser mortals behind bars for extended periods of time. THE answer is simple — they own the politicians through campaign finance.”
Finally, Reader J. K. said: “Another day, another story about why these banks and their execs are too big to fail and too big to jail. We have yet to see individual or corporate punishment that rates as appropriate for the crimes committed. Until then, some banks will continue regarding the fines as a cost of doing their evil business and the looting and corruption will go on and on.”
I will certainly be keeping an eye on the latest banking sector headlines, and letting you know what they mean for us as Americans and for investors overall. In the meantime, definitely continue to share your thoughts on this important topic by clicking here.
|OTHER DEVELOPMENTS OF THE DAY|
New home sales figures can be volatile because they’re based on a relatively small sample size. But the latest figures for May blew estimates out of the water! Sales jumped 18.6 percent from April to a seasonally adjusted annual rate of 504,000. That was the biggest monthly gain going all the way back to 1992, and it left sales at the highest level since May 2008.
Consumers are feeling pretty confident, too, according to the Conference Board. Its confidence index rose to 85.2 in June from 82.2 a month earlier. That beat expectations, and was the best reading since January 2008.
So again, I will ask: What the heck is the Fed doing with interest rates at zero percent?? Why are we still running a crisis-era monetary policy when the crisis is long past?? Why is Fed Chairman Janet Yellen so dismissive of inflation concerns?
My answer is pretty straightforward: Because they’re NUTS! Look for the Fed to be forced into beating a hasty policy retreat if the economic and inflation data keeps coming in this strong.
Will the U.S. and Germany collude to fix Thursday’s match, allowing both to advance out of the “Group of Death”? Not according to U.S. coach Jurgen Klinsmann, or anyone else who has gone on record discussing the issue. Frankly, I believe the U.S. can and should go for the win, something USA Today goes into more detail about here.
Reminder: You can let me know what you think by putting your comments here.
Until next time,