Sometimes you just have to own that you got it wrong, or at least that you might be "early." For ages I simply didn't believe that oil would take out $43, because oil was so universally hated that I didn't think the whole boat could be right. I had never, in my career, seen such uniform negativity EXCEPT from two people I trusted most: Boone Pickens and David Demshur, the CEO of Core Labs (CLB).
Now, I am not a bear on oil down here -- that's where you should have been much higher, which, fortunately, I was. But when oil broke down to the $40s, I thought it represented an opportunity to scale in to the highest quality companies in the business, which, with the exception of Marathon (MRO) for Action Alerts PLUS I think we have done.
Now, though, after yesterday's trading when oil unhesitatingly took out $43 when it head-faked to $44 first, I am flummoxed.
There's no doubt I got the demand side right. It's good and getting better.
But I believed the Saudis would be more rational than they are being, and I thought the quarters past would show a further decline in production than we got. Yes, April represented the peak. And yes, there is depletion that's high.
But I didn't listen to my friend Rusty Braziel enough. If you don't know Rusty, he has the single best newsletter on oil in the world, RBN Energy, and he made it very clear to me that we were going to pump far more than I thought we would in 2015. He got it right.
Now I am faced with a dilemma. Too much oil on the sheets given a bet on two high quality companies, EOG Resources (EOG) and Occidental Petroleum (OXY) and a low quality one, Marathon Oil.
Jack Mohr, Research Director of the trust and I, go over this one every day, and while we were gratified by the Tuesday-Wednesday jump, we know that it is crunch time if oil takes out $40.
Do you buy more? Do you wait until $35 given how right the crowd's been? The situation is in flux.
But the big issue is that I wanted to bet against an overwhelming consensus, and it is worth remembering, at times, that the consensus can be RIGHT.
It might not be right tomorrow, but the crack from $50 right through $43 to $42 surprised me. I thought I should just admit it, rather than act as it hasn't happened. I got it wrong and am now hoping I am just early.
But hope, as I have written a gazillion times, should not be part of the equation.
Random musings:
For what it is worth, I still like the MLPs with limited commodity exposure and think the Goldman upgrade of Kinder Morgan (KMI) is right...
