Ominous Signs Emerging
In this issue:
Crude has been the stellar outperformer during the recent selloff, outperforming not merely most other slumping commodities but stocks and bonds as well. But given evidence of major stress in the emerging markets that have driven recent demand growth, this is a time for caution. The path of least resistance points to lower prices as several key developing economies cope with a credit crunch and rapid currency depreciation against the US dollar.
Crude has been the stellar outperformer during the recent selloff, outperforming not merely most other slumping commodities but stocks and bonds as well. But given evidence of major stress in the emerging markets that have driven recent demand growth, this is a time for caution. The path of least resistance points to lower prices as several key developing economies cope with a credit crunch and rapid currency depreciation against the US dollar.
While coal demand in China and India is likely to keep growing, US suppliers are too far away to benefit. We’re more optimistic about the long-term recovery potential of uranium miners still depressed by the downturn in nuclear power in the wake of Fukushima.
One stock we already like a lot is Noble Energy, an intrepid explorer reaping major windfalls from offshore discoveries overseas as well as shale drilling on US soil. But wait for the stock to go on sale before buying. It shouldn’t take long, given the recent market action.
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