What We're Reading

I've long wondered about MLP's as interest rates begin to creep higher and crude oil, obviously, remains low.  After all, they're supposedly not tied to the price of crude oil, right?  Certainly 2015 has not been their "year" as the 10 year fluctuated, leaving me even more cautious but did this translate into a buying opportunity?  Consider this interesting piece here by TheReformedBroker

I’m sitting at the Strip House with a wholesaler from a large mutual fund / UIT sponsor two years ago. He’s a good guy but he’s there to sell. I’m there to eat thick-cut slab bacon and shrimp cocktail. I told him in advance that I’m not a buyer, but I have an open mind.

He’s showing me an SMA (separately managed account) strategy whereby his firm’s team of experts picks the best MLPs. The pitch is that MLPs are a way to participate in the growth of energy infrastructure but without having exposure to the volatility of oil prices. MLPs, he explains, are uncorrelated to the price of oil because they a

I have to throw a flag in from the sidelines calling foul on the learned men on CNBCs Fast Money table Friday (video below) as traders remain bullish on the big screen.  In fact, they do not believe crude's fall will impact our rally.  Really?  Josh Brown stated there was no correlation b/w the price of oil and the S&P500 and did their level best to downplay the selling in crude oil.  Alright, overlay a comparison chart (left) and you won't see black gold having an enormous impact on the market with a few exceptions BUT, the energy complex represents an average of 6.9% of U.S. GDP. 

If it's a bear market, this changes the scenery.  Come on Josh; there's much more that you're not saying and we know it.  Stay with me here.  So typically if we saw a ten percent correction in crude, another sector in the S&P would merely step up to the plate and help lead such as tech or financials.

This time, however, we see regional banks such a Cullen-Frost (who lend to oil names down here in Texas fo

Indeed, I've read much concern over this area as oil collapsed so it does merit a warning.  From ZeroHedge:

The S&P 500 Energy sector stocks are down over 12% year-to-date, tumbling over 3% today to fresh 20-month lows. The spread (or risk) of high-yield energy credits surged again today, breaking above 850bps for the first time... The overall high-yield credit market is being dragged wider by this contagion as hedgers try to contain the collapse that is possible. For now, the S&P 500 remains entirely ignorant of the fact that over a third of its CapEx was expected to come from this crushed sector...

According to DB

US private investment spending is usually ~15% of US GDP or $2.8trn now. This investment consists of $1.6trn spent annually on equipment and software, $700bn on non-residential construction and a bit over $500bn on residential. Equipment and software is 35% technology and communications, 25-30% is industrial equipment for energy, utilities and agriculture, 15% is transpor

I'm sorry but you just know in your gut that the entire "limited supply" was just a ploy.  I've always found it amazing that once the big boys switched over their rigs from gas to oil, not only were we pumping out more of the black stuff, but surprise surprise they found boatloads of the stuff in Bakkens leading us towards energy independence!

The US produced more crude oil domestically during January-April this year at an average rate of 7.11 million barrels per day (bbl/d) than in any comparable period in more than two decades going back to 1992. Meanwhile, imports during the first four months of this year fell to the lowest level for that period since 1997, sixteen years ago. Together, the increased domestic production this year and the declining dependence on foreign sources brought net oil imports to a 26-year low.  Read more at aei.org