Weekend Ramblings

The SPX hit a fresh 5 year high Friday. Anytime the market makes a new high I like to observe how people are reacting to it. All I see are tumbleweeds and all I hear are crickets. Some intermediate term indicators are redlining here but aside from that, I don't see anything that resembles giddiness which would indicate we've seen the "euphoria" phase of the cycle. It seems to me the market is going to tag at least 1500 before we run into any IT problems. One of the things that's getting a lot of attention these days is the reviving US housing market. US housing now appears to be tailwind as opposed to the headwind it has been for the past few years. Housing has been one of the major missing pieces of the recovery (the other being jobs) and so now we could see the recovery shift into a higher gear this year.

Something that I've noticed for some time now, which is slowly getting some media attention, is the energy renassance in the US. Thanks to new drilling technologies, the US has a new found bounty of oil and natural gas. The following chart is quite stunning.

This boom in oil production is largely the result of oil shale boom in North Dakota. I've read some reports that suggested North America could be a net exporter of energy in 15 years. Imagine that! I always take long term forecasts like this with a grain of salt because so many things can change in  15 years but there's no denying that all this new found oil and gas could be a massive game changer. For starters, this could put a big dent towards trade deficit and peak oil worries. By no means am I an expert on the energy situation in the US and I'm sure you can find boat loads of people who are critical about these shale developments but the above chart speaks for itself and I'm pretty sure that all the worries about "peak oil" didn't take into account all of these new unconventional oil discoveries which are economically recoverable thanks to advancements in technology.

With respect to nat gas, there seems to be major discoveries of shale fields every year not only in North America but around the world. Granted, some of these discoveries may not be economically feasible as they are located in remote areas but a lot of them are indeed viable especially in North America. What this means is that Canada and the US both have the potential to be major energy suppliers to the rest of the world with cleaner burning nat gas being the energy source of choice vs it's direct competitors nuclear and coal. It will also stimulate switching over from oil derived fuels to nat gas. Mind you, it will take years for all the necessary infrastructure such as pipelines and LNG terminals to make this a reality but the potential is there. These are the sort of themes as an investor you need to be looking for. I'm currently playing the LNG theme via hwo.to. Right now they are benefiting from the LNG boom in PNG and given the recent developments in Canada, it seems as if there is going to be at least 3 major LNG projects in the works and that's going to benefit hwo's Canadian operations tremendously. The only issue is about the timing....I'm not sure how long it will be before hwo will see any positive impacts in the way of increased demand for nat gas drilling services from these LNG projects.

So, here's the thing. You can either focus on the negatives or the positives. The media and the herd have been doing the former for years now and they have nothing but misery and losses to show for it. So many people are still scarred by the 2008 collapse and are missing out on all the opportunities to make money being an optimist/opportunist. That's fine by me. By the time the herd embraces the market,  I'll be heading towards the exits.