Drillers and exploration stocks are higher by 7% over the past month. Over the same period, the staid and calm JNK, representing junk bonds, is lower by 1.75%. In recent days, JNK has been routed.
Why is this important? It represents the credit trustworthiness of some of the riskier elements in the market, many of which are in the oil and gas sector. So we have a situation now where the riskiest stocks (oil and gas), based solely on their credit ratings, are trending higher on the equity side, but the bond market is in flux. This is an arbitrage worth perusing, the equity-bond guy spread. I’ll take the bond guy every day of the week forever, over the idiot stock monkey.
I added to my DRIP position.
What’s important for you to watch, as this develops, is how the higher quality paper is performing. Watch LQD for a tell.
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How about some Uranium? Yellowcake is on fire. What a difference a day makes.
Gutsy. Oil is an end of cycle mover, which is likely where we are now. So the difference now is new production is keeping the market price in order? I feel cap ex is about to grow very fast once again in oil because the supply is not really there at every whim and fancy. Its the cycle.
Hey Doc… Drip ain’t a bad call. That’s in my breadbasket. Take the meat of the move and position properly.
Oil going straight to $66.
All my money is long oil. 80 percent renewable is only possible within the next 45 years. By that time we’ll long have wasted our entire oil supply, which coincidentally is required for other stuff.