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February 12, 2020
Market Outlook They were the number 1 Energy Fund in the world according to Morningstar last year. Energy stocks are down 15% this month on the coronavirus fear. Supply of oil is falling faster than loss in demand due to China's reduced consumption, he believes. The second half of the year will begin a multi-year bull run for oil. OPEC is providing cover to move to another supply cut this year he says. Supply growth in the US is dropping sharply and he might expect to see a net decline in production there next year. This will be the first year in the last five years, where US supply growth will be less than total global demand growth -- this means barrels outside of the US will be in demand. A supply crunch is coming in the upcoming years he concludes.
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General Market Comment
February 12, 2020
Market Outlook They were the number 1 Energy Fund in the world according to Morningstar last year. Energy stocks are down 15% this month on the coronavirus fear. Supply of oil is falling faster than loss in demand due to China's reduced consumption, he believes. The second half of the year will begin a multi-year bull run for oil. OPEC is providing cover to move to another supply cut this year he says. Supply growth in the US is dropping sharply and he might expect to see a net decline in production there next year. This will be the first year in the last five years, where US supply growth will be less than total global demand growth -- this means barrels outside of the US will be in demand. A supply crunch is coming in the upcoming years he concludes.
COMMENT
COMMENT
February 12, 2020
Free Cash Flows Several companies are posting great free cash flow -- up to 40% of market cap. Once we get past the Corona virus scare, global demand will grow again. We will see WTI go back to $60/bbl. Valuations will rise sharply. You don't have to be a believer in wild oil price increases.
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General Market Comment
February 12, 2020
Free Cash Flows Several companies are posting great free cash flow -- up to 40% of market cap. Once we get past the Corona virus scare, global demand will grow again. We will see WTI go back to $60/bbl. Valuations will rise sharply. You don't have to be a believer in wild oil price increases.
COMMENT
COMMENT
February 12, 2020
A lot of folks missed this current rally. But how can this rally happen during the trade war last year and the current coronavirus? He answers, markets are the result of a thousand moving parts, and this market has huge shock absorbers. Since 1950, bull market corrections of over 12%, on average, the market rallied 90% before the next 10% correction over 31 months. Investors discounted the bad things that happened in 2018 and sold the rally in 2019. All through 2019, investors sold during the rally (instead of holding on). We've have huge liquidity from central banks while manufacturing data has slowly been improving around the world. There's also wage growth in the U.S. If the market is strong and there are under-positioned investors, the strong market will drag them in. Think of the 2014-5 pullback, then the rally of 2016-7; 2017 didn't allow investors to get in. The coronavirus pullback lasted only 4 days and dipped only 3.9%, but the buyers came in.
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General Market Comment
February 12, 2020
A lot of folks missed this current rally. But how can this rally happen during the trade war last year and the current coronavirus? He answers, markets are the result of a thousand moving parts, and this market has huge shock absorbers. Since 1950, bull market corrections of over 12%, on average, the market rallied 90% before the next 10% correction over 31 months. Investors discounted the bad things that happened in 2018 and sold the rally in 2019. All through 2019, investors sold during the rally (instead of holding on). We've have huge liquidity from central banks while manufacturing data has slowly been improving around the world. There's also wage growth in the U.S. If the market is strong and there are under-positioned investors, the strong market will drag them in. Think of the 2014-5 pullback, then the rally of 2016-7; 2017 didn't allow investors to get in. The coronavirus pullback lasted only 4 days and dipped only 3.9%, but the buyers came in.