Many traders know the old saw “overbought can become more overbought.” Strongly trending markets may look ready to crack on paper but keep going longer than anyone expects. The other side of that coin is that steep rallies can have equally steep corrections, and they, too, can last longer than anyone expects. #-ad_banner-#Right now, the energy sector seems to be at a crossroads between these two possibilities. After a sharp run up this year, the Energy Select Sector SPDR ETF (NYSE: XLE) became very extended to the upside by numerous metrics. Momentum indicators such as the… Read More

Many traders know the old saw “overbought can become more overbought.” Strongly trending markets may look ready to crack on paper but keep going longer than anyone expects. The other side of that coin is that steep rallies can have equally steep corrections, and they, too, can last longer than anyone expects. #-ad_banner-#Right now, the energy sector seems to be at a crossroads between these two possibilities. After a sharp run up this year, the Energy Select Sector SPDR ETF (NYSE: XLE) became very extended to the upside by numerous metrics. Momentum indicators such as the Relative Strength Index (RSI), the spread to key moving averages, lopsided bullish sentiment and an uncharacteristically high price/earnings (P/E) ratio all suggest it is time for a correction. The question now is how to play it. Do we buy this dip or do we wait for a pullback to a lower-risk entry point?   For me, after the energy sector has racked up 20%-plus gains since February, the latter is far more palatable. I may miss the next leg higher, but given that the market is still overbought, controlling risk is paramount. On the daily chart, we can… Read More

Precious metals traded lower this spring as investors worried about the potential for interest rates to rise later in the year. After an unprecedented period in which the Federal Reserve has kept interest rates near zero and spent billions of dollars per month buying Treasury bonds, it is now making a calculated exit from its bond-buying program. #-ad_banner-#For investors in gold, one of the primary fears is that the Fed will allow interest rates to rise, which in turn, would lead to a stronger U.S. dollar. As a general rule, gold prices fall when the dollar is rising because a… Read More

Precious metals traded lower this spring as investors worried about the potential for interest rates to rise later in the year. After an unprecedented period in which the Federal Reserve has kept interest rates near zero and spent billions of dollars per month buying Treasury bonds, it is now making a calculated exit from its bond-buying program. #-ad_banner-#For investors in gold, one of the primary fears is that the Fed will allow interest rates to rise, which in turn, would lead to a stronger U.S. dollar. As a general rule, gold prices fall when the dollar is rising because a stronger dollar can buy more ounces of gold for less. Last week, the Federal Reserve completed its scheduled meeting, and as expected, announced a fifth straight $10 billion cut in its monthly bond-buying program. While these cuts are widely expected to be bullish for the U.S. dollar, the Fed also issued a statement noting that it intended to keep the short-term interbank lending rate in a range of zero to 0.25% “for a considerable time after the asset purchase program ends.”  Prices for precious metals jumped on the announcement as it is becoming clear that the Fed will continue to… Read More

It looks like Barack Obama is crafting a legacy as the Climate Change President. #-ad_banner-#He has granted the Environmental Protection Agency new powers, and his administration has delayed TransCanada’s (NYSE: TRP) Keystone XL pipeline project longer than most anyone expected. The president rolled out his most sweeping policy yet this month, proposing that the EPA mandate a 30% reduction in carbon emissions from power plants by 2030. The EPA puts the cost of the new proposal as high as $8.8 billion but contends that savings to people’s health would more than offset that expense. This week, the U.S. Supreme Court… Read More

It looks like Barack Obama is crafting a legacy as the Climate Change President. #-ad_banner-#He has granted the Environmental Protection Agency new powers, and his administration has delayed TransCanada’s (NYSE: TRP) Keystone XL pipeline project longer than most anyone expected. The president rolled out his most sweeping policy yet this month, proposing that the EPA mandate a 30% reduction in carbon emissions from power plants by 2030. The EPA puts the cost of the new proposal as high as $8.8 billion but contends that savings to people’s health would more than offset that expense. This week, the U.S. Supreme Court upheld the EPA’s power to regulate greenhouse gases. Applying the law would increase the number of emitters covered by the rules to more than 80,000 from fewer than 280 and could subject businesses to an average of up to $60,000 in increased costs. As Justice Antonin Scalia said, “The EPA is getting almost everything it wanted in this case.” The Death Of ‘King Coal’? According to the U.S. Energy Information Administration, coal was used to generate more than half the country’s electricity as recently as 2005. The boom in natural gas production and regulations on emissions drove that percentage… Read More

Those who loaded up on gold, oil and other commodities a few years ago in anticipation of raging inflation related to quantitative easing are likely very disappointed. #-ad_banner-#As most investors probably know, commodities have trailed stocks pitifully in recent years. The Dow Jones-UBS Commodity Index (DJ-UBSCI), which tracks a group of 20 commodities, fell 6.5% a year for the past three years, while the S&P 500 gained 17.6% annually during the same period. But one of the nice things about investing is just about everyone gets a chance to be right if they wait long enough… and commodities… Read More

Those who loaded up on gold, oil and other commodities a few years ago in anticipation of raging inflation related to quantitative easing are likely very disappointed. #-ad_banner-#As most investors probably know, commodities have trailed stocks pitifully in recent years. The Dow Jones-UBS Commodity Index (DJ-UBSCI), which tracks a group of 20 commodities, fell 6.5% a year for the past three years, while the S&P 500 gained 17.6% annually during the same period. But one of the nice things about investing is just about everyone gets a chance to be right if they wait long enough… and commodities investors may finally be having their day.  Indeed, commodities appear to be staging a comeback, with the DJ-UBSCI already up more than 7% this year, compared with a 5.6% gain for the S&P. One probable factor in this resurgence: rising consumer prices. According to the latest inflation data (released by the Bureau of Labor Statistics on June 17), the Consumer Price Index (CPI) jumped 0.4% in May — twice the 0.2% increase economists expected. What’s more, May’s 0.3% increase in the core CPI, which excludes food and energy, was the largest since August 2011. With inflation apparently accelerating, investor demand… Read More

Four decades ago, a move by OPEC to curtail exports led to a surge in oil prices that pushed the global economy into recession. And history repeated itself six years ago when the demand side of the equation led to a similar “super spike” in oil prices. West Texas Intermediate crude (WTIC) oil briefly moved above $140 a barrel in July 2008, which some economists believe was a key catalyst behind the sharp economic slowdown later that year. #-ad_banner-#As we head toward the midpoint of 2014, both the supply and demand part of the picture are starting to… Read More

Four decades ago, a move by OPEC to curtail exports led to a surge in oil prices that pushed the global economy into recession. And history repeated itself six years ago when the demand side of the equation led to a similar “super spike” in oil prices. West Texas Intermediate crude (WTIC) oil briefly moved above $140 a barrel in July 2008, which some economists believe was a key catalyst behind the sharp economic slowdown later that year. #-ad_banner-#As we head toward the midpoint of 2014, both the supply and demand part of the picture are starting to look worrisome. And though crude oil has made a fast move toward (and past) the $100-a-barrel mark, it won’t take much to push prices past $120 a barrel — and investors should be thinking about the ramifications of such a move.  Libya And Iraq Heat Up The downfalls of Libya’s Muammar Gaddafi and Iraq’s Saddam Hussein were great news for democracy advocates, but we’re now seeing that these countries have very troubled futures. Both countries now have very weak central governments, and their ability to meet their oil export quotas is becoming a key concern. In Libya, for example, daily… Read More

Not many authors can lay claim to writing a book that fetches nearly $3,000 for a new copy. #-ad_banner-#Then again, not many authors have $1.3 billion in the bank either.  Seth Klarman, founder of Boston-based Baupost Group, has more than a few professional and philanthropic accomplishments to be proud of. His book, “Margin of Safety: Risk-Averse Investing Strategies for the Thoughtful Investor,” is a classic in the world of investing literature and has become one of the most expensive and hard-to-find books of its kind. With about $26 billion in assets under management, Klarman generated positive returns last… Read More

Not many authors can lay claim to writing a book that fetches nearly $3,000 for a new copy. #-ad_banner-#Then again, not many authors have $1.3 billion in the bank either.  Seth Klarman, founder of Boston-based Baupost Group, has more than a few professional and philanthropic accomplishments to be proud of. His book, “Margin of Safety: Risk-Averse Investing Strategies for the Thoughtful Investor,” is a classic in the world of investing literature and has become one of the most expensive and hard-to-find books of its kind. With about $26 billion in assets under management, Klarman generated positive returns last year that earned him $350 million. An in-depth scan of his current portfolio, outlined in his first-quarter Form 13F filing, has revealed some energy-focused high-yielders that are worth a closer look from growth and income investors alike. Alon USA Partners (NYSE: ALDW ) Alon USA Partners (NYSE: ALDW) is the king of the hill in terms of dividend yield for Klarman’s portfolio, with a current annual yield of 14.6%. The downstream oil company markets its products in self-branded convenience stores primarily in southern U.S. states like Texas and Arizona. With a market cap just north of $1 billion, Alon is a smaller player among refiners. Its Texas-based refinery… Read More

Things are getting out of control in Iraq, and it’s the latest sad chapter in what has arguably been one of America’s biggest foreign policy stumbles of the past few decades.  #-ad_banner-#Now, regardless of how you may feel about the Iraq war from a moral or strategic perspective, there is no denying the current disturbing facts on the ground right now. ISIS, an Al-Qaeda-affiliated Islamic extremist group, has seized control of several major Iraqi cities, and the group is moving south quickly with plans to take control of Baghdad from the current government. This troubling trend is one… Read More

Things are getting out of control in Iraq, and it’s the latest sad chapter in what has arguably been one of America’s biggest foreign policy stumbles of the past few decades.  #-ad_banner-#Now, regardless of how you may feel about the Iraq war from a moral or strategic perspective, there is no denying the current disturbing facts on the ground right now. ISIS, an Al-Qaeda-affiliated Islamic extremist group, has seized control of several major Iraqi cities, and the group is moving south quickly with plans to take control of Baghdad from the current government. This troubling trend is one that’s caused geopolitical upheaval, and that upheaval is being reflected today in the price of crude oil. In fact, the price of both West Texas Intermediate crude oil and Brent crude surged to new highs for the year as it became clear that the violence in one of Iraq’s major cities had escalated into what could be an overthrow of the U.S.-backed government.  Interestingly, from an actual oil production and shipment standpoint, the upheaval doesn’t really mean all that much in terms of real-world constricted supply, at least so far. However, Wall Street and the commodities markets are future pricing… Read More

They say, the bigger the ship, the longer it takes to turn it around. When it comes to stocks, the deeper the bear market, the longer it takes to right the ship. #-ad_banner-#One area where conditions appear to be slowly improving after getting mauled by the bears is the gold mining sector. After peaking in 2011, gold and gold stocks have been in a tailspin. Following a failed rally attempt in 2012, the pace of the decline accelerated. By late last year, the Market Vectors Gold Miners ETF (NYSE: GDX) was down roughly 70%. The best part about… Read More

They say, the bigger the ship, the longer it takes to turn it around. When it comes to stocks, the deeper the bear market, the longer it takes to right the ship. #-ad_banner-#One area where conditions appear to be slowly improving after getting mauled by the bears is the gold mining sector. After peaking in 2011, gold and gold stocks have been in a tailspin. Following a failed rally attempt in 2012, the pace of the decline accelerated. By late last year, the Market Vectors Gold Miners ETF (NYSE: GDX) was down roughly 70%. The best part about trading is that we can pick the timeframe in which we operate. Therefore, we can make some money in the short term while we wait for the major change in trend to develop. Yamana Gold (NYSE: AUY) presents such an opportunity. Over the past two months, it has developed a pattern that looks to be the end of the most recent phase of its decline and could send prices high enough to challenge their bear market trendline. From April through this week, AUY has traded in a sideways pattern, and we can see an inverted head-and-shoulders formation. Momentum… Read More

There are times when it makes sense to take bullish positions in breakout stocks ahead of long-term advances. And then there are periods when that strategy is dangerous because equities have already advanced to the point where breakouts are prone to failure. #-ad_banner-#In today’s market, in which we have blue-chip indices routinely hitting new highs while small caps have faced more pressure, I am hesitant to buy breakouts. The bull market may still have legs, but many stocks’ valuations are at premium levels, leaving them vulnerable to significant pullbacks. Rather than using our put-selling… Read More

There are times when it makes sense to take bullish positions in breakout stocks ahead of long-term advances. And then there are periods when that strategy is dangerous because equities have already advanced to the point where breakouts are prone to failure. #-ad_banner-#In today’s market, in which we have blue-chip indices routinely hitting new highs while small caps have faced more pressure, I am hesitant to buy breakouts. The bull market may still have legs, but many stocks’ valuations are at premium levels, leaving them vulnerable to significant pullbacks. Rather than using our put-selling strategy on one of the many stocks trading at new highs, I want us to set up an income trade using a stock that has been under pressure and may very well be finding support. Shares of Vale (NYSE: VALE) have closely tracked the spot price for iron ore over the past several quarters. As questions emerge regarding future infrastructure development in China, prices for iron ore have declined. This has been compounded by the fact that the big three iron ore producers, BHP Billiton (NYSE: BHP), Rio Tinto (NYSE: RIO) and Vale, have made significant investments in their infrastructure… Read More

The modern steel industry got its start back in the 1850s and took off after the American Civil War, just as the U.S. and global economies took off. Many great fortunes were made in the steel boom. #-ad_banner-#What’s more is that to this day there is no effective alternative for steel. The biggest fortune created from steel was that of Andrew Carnegie, who famously gave away all his money to charities after his death. Today, the modern Andrew Carnegie is Lakshmi Mittal, an Indian steel magnate. Through a series of acquisitions, he built his family’s… Read More

The modern steel industry got its start back in the 1850s and took off after the American Civil War, just as the U.S. and global economies took off. Many great fortunes were made in the steel boom. #-ad_banner-#What’s more is that to this day there is no effective alternative for steel. The biggest fortune created from steel was that of Andrew Carnegie, who famously gave away all his money to charities after his death. Today, the modern Andrew Carnegie is Lakshmi Mittal, an Indian steel magnate. Through a series of acquisitions, he built his family’s steel business into the world’s largest steel company: ArcelorMittal (NYSE: MT). This company is now the best play on the global economy, since steel is used in so many industries and products, from automobiles in Detroit to skyscrapers in China.  Steel demand is everywhere — and so is ArcelorMittal. Mittal and his family are ArcelorMittal’s largest shareholders, with a 38% stake in the company. The fact that the family has a vested interest in the strength of the company ought to provide a margin of comfort to investors. Over the past few years, ArcelorMittal has been focused on reducing costs… Read More