By Justin Spittler, editor, Casey Daily Dispatch
"I am going to lift the restrictions on American energy and allow this wealth to pour into our communities.”
Donald Trump said this in September 2016. It was part of his pledge to promote “energy independence.”
And unlike some of his other promises, Trump has delivered on this one.
He’s gutted the Environmental Protection Agency (EPA). He’s rolled back regulations on oil and gas drilling. And he’s slashed the corporate tax rate.
Now, you might not agree with these policies… but you can’t deny that they’re good for the energy business.
That’s why I’ve been urging readers to buy energy stocks all year. If you took my advice, congratulations. You’re probably already sitting on big gains.
If you haven’t yet, be sure to read this essay closely. As you’re about to see, this opportunity won’t last much longer. In fact, the buying window could soon slam shut.
And there’s a simple reason for this…
• U.S. oil production is already exploding…
Last year, it jumped 5%. The industry’s now producing 36% more oil than it did five years ago.
That’s a giant jump. But the Energy Information Administration (EIA) thinks this is just the beginning.
The EIA is a government agency that collects and analyzes information about the energy sector.
Last Tuesday, it said it expects U.S. oil production to reach 10.3 million barrels per day (bpd) by the end of this year. That would smash the current annual production record of 10 million bpd, which was set in 1970.
The EIA also raised its production forecast for next year. It now expects domestic oil production to top 11 million bpd by the end of 2019.
• This is good news for oil and gas producers…
It’s also good for oil services companies, one of my top speculations for 2018.
And it’s incredibly bullish for another special kind of energy company.
Most investors haven’t considered buying these stocks. That’s because they lagged the market all last year.
But that’s behind us. This year, these laggards are showing major signs of life.
• I’m talking about master limited partnerships (MLPs)…
An MLP is a type of business venture. It offers unique tax advantages, but trades like any other stock.
Most MLPs are energy infrastructure companies. They process, store, and transport oil and other commodities like natural gas.
And that alone makes them one of today’s best investing opportunities.
Think about it. When oil companies pump oil, it doesn’t magically appear in our gas tanks. It must first be transported from the field to a refinery where it’s turned into gasoline.
That’s where MLPs come in. They move oil from Point A to Point B, and they collect fees based on how they move.
Because of this, MLPs make a lot of money when oil production is rising. But that’s not the only reason I’m bullish on them.
• MLPs are coming off an awful year…
The Alerian MLP ETF (AMLP), which invests in 27 different MLPs, fell 15% in 2017. The S&P 500, on the other hand, rose 22%.
Because of this, many investors gave up on MLPs. But not me.
You see, I like to buy assets other investors want nothing to do with. This approach lets me buy great companies at deep bargains.
But I’ll never buy something just because it’s cheap. I need stocks to stop falling before I pull the trigger. And that’s exactly what MLPs just did.
The chart below shows Alerian’s performance since the start of last year.
As you can see, AMLP was in a steady decline for much of last year before it bottomed in late November.
Since then, it’s rallied 18%. More importantly, it’s broken out of a downtrend that began last February. It’s now in the early stages of a new uptrend.
This is highly bullish. For the first time in over a year, MLPs have momentum on their side.
• So, consider speculating on them if you haven’t already…
You can easily do this by buying AMLP. This fund allows you to bet on a basket of MLPs rather than just one or two companies.
Just understand that the energy sector is highly cyclical. So, invest with discipline. Don’t invest more money than you can afford to lose. Use stop losses. Take profits when they come.
Also, don’t forget that AMLP has been on a tear lately. So, look to buy on pullbacks.
January 15, 2018
P.S. E.B. Tucker, editor of The Casey Report, predicted that Trump would be good for the energy industry back in March. He has two energy infrastructure plays in buy range today that are set to soar in the coming months. You can learn about these companies by signing up for The Casey Report. Click here for details.
Chart of the Day: Stocks Want to Run… Let Them
By E.B. Tucker, editor, The Casey Report
Today’s chart plots the S&P 500 Index alongside the earnings per share of the index.
Below, you can see the price of the index, shown in green, spent more than a year outrunning index earnings, shown in blue.
This chart tells me one thing: When stocks want to run, let them.
I had a conversation with Doug Casey earlier this month about ideologues and pragmatists. Pragmatists tend to make more money in the market; that’s my opinion, at least.
The ideologues who said, “This market has to crash… It’s too high… It’s a bubble,” sat aside and largely missed the entire bull market.
As a pragmatist, I look at the chart above and say this market knows something we don’t. Better to own quality stocks with trailing stop losses in place to protect against a sudden fall—like we do in The Casey Report—than sit aside predicting a collapse for nearly a decade.
P.S. In The Casey Report, we’ll continue to own high-quality stocks in our core portfolio as long as this market moves higher. You can access my top picks right now with a risk-free trial subscription. Click here to learn more.
Today, more feedback on our essay, “Why Sessions Can’t Stop This Marijuana Boom”:
Sessions is a fool. What business does he have calling marijuana a drug on par with heroin? Heroin also should be legal along with all drugs; then we could go about the business of taxing drugs so that we can help addicts when they are finally ready to clean up.
This may be an interesting test of states’ rights… hopefully not one that leads, like the last major test, to civil war. Sessions' views on pot are not the key issue, although they got lots of press coverage. The first issue is that Congress gave pot a Schedule 1 status with no meaningful prior research. It hypocritically outlawed weed research which might have hastened its delisting.
And now, faced with a growing body of information that calls that listing into question, Congress evades its moral obligation to decriminalize weed. It apparently tolerates a drug Nazi, since it has not censored Sessions. And it has made no significant gestures to ameliorate the grave injustices spawned by their careless legislation.
Indeed, a cynical observer might conclude that Congress will never delist weed (but will legalize the hallucinogenic-free weed for medical purposes) because of the potential catastrophic legal liability resulting from all the appalling unjust incarcerations stemming from this legislation. And of course, we will ignore the billions wasted on the "War on Drugs" and the neo-Nazi police force it has spawned.
I am continually amazed at the level of ignorance some show when talking about marijuana. These folks have swallowed whole the lies of Reefer Madness and US Drug War propaganda, and have no idea of what they’re talking about. The level of fear is astounding, having been successfully maintained all these years by law enforcement and Big Pharma. Well, they’ve had their day, and now it’s our turn.
The overwhelming benefits of legalization will have us all wondering what the fuss was about and why it took so long for “us” to come to our senses. This is not to say that it should be readily available to children any more than alcohol, tobacco, or firearms. Let common sense, individual responsibility, and freedom reign!