The Order: Sector Rotation

“I think the road-map ahead is a market crash, followed by obscene fiscal stimulus. As always, I’m trying to think a few steps ahead here. I’m making a list of beat-down sectors who benefit from this change in government policy. I want to be ready to buy as soon as they get serious about unleashing the stimulus. You need a crisis that’s severe enough that both political parties can agree on stimulus. We’re not there yet, but we will be. If you thought QE was nutty, wait until you see what drunken sailor mode looks like. Inflation is coming. Be VERY careful if you own assets with duration risk.” Kruppy

Hussman: “…adopted a constructive, unhedged, or leveraged market outlook after every bear market decline in over three decades. I have every expectation that such opportunities will emerge over the completion of this market cycle. The mistake would be to believe in a permanently high plateau.”

This Jeffrey Gundlach is ought to be watched in it’s entirety.

You Should Be Buying Gold Stocks Now says gold stock analyst Jordan Roy-Byrne who has not made his career being perpetually bullish. Miners Are Leading The Way Higher at Sprott. We at Independent Stock Analysis think the precious metals complex is the most appealing sector at the moment. Even the mainstream Financial Times says Gold is looking more and more attractive. The Next Wave of Debt Monetization Will Be a Disaster in which gold is the winner. ISA does not have the extreme view of a goldbug like Alasdair Macleod, but we read his excellent insight anyway: “For these nations, which use dollars, euros, pounds and yen, there is no apparent escape from an eventual fiat money collapse.”

The second sector interesting to ISA is natural gas. The appeal, of course, is the high natural decline rates which alleviate cyclical oversupply. Today’s secular oversupply is long in tooth. Meanwhile, the customer became addicted per RBN: “Lower-48 gas production last week hit a new high of 96.4 Bcf/d, after surpassing 95 Bcf/d not too long ago (in late October). That’s remarkable considering that production was only 52 Bcf/d just 12 years ago.”

“…investors would be wise to watch three areas on the supply side which are already responding to a relatively short period of unsustainably low gas prices. We believe these basins will define the outlook for natural gas over the coming years:

  1. Non-Permian associated gas volumes, particularly from the SCOOP/STACK
  2. Utica rig count and well completions
  3. Haynesville rig count and well completions

As these trends unfold, we will report back. Stay tuned.” Sailing Stone

Looking at oil: Tight Oil and the Willing Suspension of Disbelief:

  • Oil will continue to dominate the world energy stop looking for improbable solutions that allow us to live like energy
  • Unconventional oil has bought the world a fewdecades of high density energy but does not offer ameaningful long-range alternative.
  • Humans have never gone from higher- to a lower-density energy source.
  • While increased use of renewable energy isinevitable and desirable, it is not a satisfactorysubstitute for oil.
  • A transition away from an oil-weighted energysupply will be complex, costly and lengthy despitesustaining current levels of energy use.
  • The best path forward is to stop looking forimprobable solutions that allow us to live like energy is still cheap, and find ways to live better with less

We’re about to move from the Age of Abundance to a Return to Scarcity” according to this veteran energy investor.” This informative discussion will bring nostalgia to the old peak oil crowd. Oil may boom as a ginormous inflationary driver coming out of the next recession. Hedgeye

Leading up to the Independent Stock Analysis portfolio, beginning January 1 2020, has been a time of reflection. Here are 24 contrarian ideas for the 2020s from DB. The overvalued asset market, driven by indexing gone wild, central bank steroids, and outrageous budget deficits may be near an inflection point. Such would be fortuitous beginning to the ISA portfolio.