The issue of energy is not a supply problem it’s a delivery problem.

The issue of energy is not a supply problem it’s a delivery problem. We are not running out of resources, its our ability to deliver energy to the right place at the right time to the right people at the right price that is the problem. The US has so under invested in energy infrastructure since the 1970’s the ability to deliver energy has been so constrained as to push up prices and until the restraints on the energy delivery system are relieved we will continue to feel the pinch of higher energy prices . That means we need, power plants, transmission lines, refineries, shipping terminals, drilling rigs, better regulatory environments and so on and so on…

Looks like we have gotten a strong counter rally the last two weeks. What has worked the last year or so, what I have been calling the 1970’s inflation trade or “Disco trade” of energy, Ag and precious metals has backed off while the counter sectors such as airlines and financials have rebounded. The process has been exacerbated by heavy short covering and the climatic event of Fannie Mae and Freddie Mac almost testing the implied guarantee of the federal government. So what’s next, I would expect the counter rally in airlines to continue until oil prices stabilize again and the financials bounce should get you back up to the 50 day moving average and then the fundamentals of each issue and the industry should begin to guide us.



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