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The surprising reason big oil could be the best investment of 2022

Nov 19, 2021

Good morning!

There’s not a lot happening in the world that we haven’t already talked about or been months ahead of so I’ll keep it brief today.

Here’s my playbook.

1 –Dow, SP500 dented as Austria goes into lockdown

Austria announced a new national lockdown as Covid cases spike and Germany’s reportedly on the same path … right on schedule exactly as I cautioned would happen when Covid started.

Covid will dent sentiment and the world will have to deal with permanent “clusters” as cooler weather drives people indoors and holidays make us cluster.

This will cause Pfizer and Moderna to achieve annuity-like status. (Read)

Tech is also going to run higher, including specifically the companies I’ve recommended in One Bar Ahead™ which will lead the pack… again.

2 – Permabears need not read this

We’re nearing the close of earnings season and 90% of companies have reported with roughly 80% beating estimates. Average growth remains at 41.5% YoY. “Yeah, but …,” scream the permabears and the merchants of financial doom.

I really feel for these people. It must be tough to be wrong for so long but even tougher on the folks who are missing out on the run.

Five of the positions I’ve recommended in One Bar Ahead™ this year are already up 40% or more! Others are powering up. Most are beating the S&P 500 Index easily over comparable time frames.

I am not telling you that to brag; that’s not my style.

What I want you to understand is that the world’s best companies are powering ahead and share prices are running far higher while the rest are getting left behind. The longer-term S&P 500 average annual return is 8%-10% a year by comparison.

Ergo, if you are buying an index or investing passively (any many people are because that’s what they’ve been taught), you are falling behind.

Buying an index fund is like buying cable TV … you have to pay for the channels you don’t want to get the ones you do.

Warren Buffett has 75% of his portfolio in just 4 stocks, and he knows a thing or two about making money. The average investor would be wise to take a page from his playbook.

Anyway, enough of that.

I simply wish more people understood that concentrating their investments in the right stocks is how you play to win. Diversifying is playing not to lose and there’s a big difference!

3 – The end of community banking

Saule Omarova who is President Biden’s nominee for Comptroller of the Currency has argued that the Fed should have every saving account for every citizen in America. (Read)

This would be a disaster for our financial system just like it’s been for other countries with similar arrangements.

The Japanese Post Office Savings system has arguably been a drag on that nation’s economy since 1875 when it was created. Certainly, since the 1990s.

Gosbank became a private piggy bank extending loans to favored individuals, companies and industries as directed by Soviet leaders in the Soviet Union even though Sperbank served as the sole repository for household savings.

I’d think very, very seriously about bailing on any community or regional bank stock if she gets nominated. And, more immediately before that happens, buying into JPMorgan (JPM).

4 – Why ongoing oil shenanigans could pay off for big oil investors in 2022

The Biden administration has reportedly asked other countries including Japan, South Korea, India, and even China if they would consider releasing oil reserves to cool energy prices ahead of a meeting of OPEC+ countries. (Read)

Problem is … both Japan and South Korea are explicitly forbidden by law to use reserves to lower prices, and China is, well, China which means that the one thing we can count on is that it will act in China’s interest.

Energy prices will be a key talking point for next year. Gas prices are already 60% higher than a year ago but may double if there’s no relief.

Much to the chagrin of greenies everywhere, good ol’ fashioned oil companies may be one of the best investments you can make for the next 24 months.

Energy is a continuum, not an on off switch. And it’s important you think about it that way.

My own two cents is that the solution is in plain sight. However, there is not a snowball’s chance in hell the President will greenlight pipelines, restart leasing, and quit stomping punitively on production even though that’d be the expedient thing to do.

To a point I’ve made many, many times … this isn’t a political jab. I don’t have the luxury of doing politics. I do money and it’s my job to help you chart a course forward no matter who is in power or how we feel about the world around us.

5. McCrash = McBuy

McDonald’s ran a $0.63 Egg McMuffin promo yesterday and reports suggest that it was so popular that it crashed the company’s app. All references were apparently removed by noon and – voila – you could order a Big Mac and everything else on the market. (Read)

Critics view this as a failure, but I think that’s the wrong approach. MCD got an unprecedented view into what people want, where they want it and how much they want to pay.

Bet ’cha fries that will result in a better, more effective and more profitable upgrade which makes the stock even more profitable 12 months from now. And the app will be even better!