Don’t buy energy stocks until the bankruptcies start

Published: Jan 26, 2015 2:06 p.m. ET

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Trying to game the next short-term move in oil and energy is probably a fool's game, in part because there's no real consensus to bet against in a contrarian kind of way right now.

There are too many opinions on both sides of the bull/bear argument to get any meaningful consensus. Consensus is as consensus does to paraphrase Gump. I do expect a truly great buying opportunity for energy and solar stocks before the markets finish taking oil prices lower.

Consumers, especially poor consumers, will benefit and so will transport companies and any energy-intensive business. Oil companies, energy companies and countries that depend on energy and oil will be hurt badly and many will go outright bankrupt in coming years.

I am not long or short any energy stock per se, though I do own a small piece of First Solar as I have for several years since solar bottomed.

Speaking of which, when was the best time to invest for the long-term in solar stocks like First Solar? Well, not coincidentally, it was when A123 and others like it went bankrupt (my subscribers and I nailed it by shorting A123 into bankruptcy). As I've been saying for the past few weeks, I fully expect we will see several major bankruptcies in the energy sector and that might very well be the best time to invest in energy stocks for the long-term.

As for the set up for solar stocks right now -- well, First Solar  and other solar stocks are likely "dead money" if oil stays below $50 a barrel. That said, solar technology and solar stocks probably won't have the extreme downside risk that oil and old-energy stocks do. I've owned $FSLR for several years and it's currently at its lowest level since early 2013. I trimmed some FSLR back a few months ago when it was near new highs, but haven't added back to it recently. Just being patient with it for now.

Energy's cheaper and that's good for consumers, but it isn't creating any deflation in the economy. Think of it this way, is food or lumber or smartphones or soda any cheaper this year than five years ago? No deflation kiddos. Deflation is a political creation.

And politics is, of course, still largely driving the markets. ECB and their QE welfare for giant global banks is front and center today and are part of the currency wars that continue to escalate.

To recap then -- energy sector needs bankruptcies before I'll buy any energy stocks. Solar stocks are likely to suffer this year. Deflation isn't real. Political and monetary policies continue to point toward more bubble-blowing bull market highs ahead -- at least for tech and Revolution Investing stock picks.

Scutify Deep Thought of the Day: What principles of trading and investing have been lost from centuries ago? The archer in this video threw everything people do in modern archery out the window and became the world's greatest archer, performing feats that make every other archer you've ever seen in movies or real-life look foolish. Are you trying to stand in one spot and shoot a two dimensional target?


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