Sector Call: Energy Stocks Are Trades, Not Investments

June 24, 2008 12:15 AM

There are two possibilities. Either energy prices march higher and collapse the word economy and THEN they go lower, or they go lower. Either way, if you are buying energy stocks here “for the long haul” you are a fool, IMO. Fool does sound kind of harsh, but that is how I see it. We have reached critical price levels in oil, coal, etc. At some point, and that is is at these levels, alternative options are economically viable. Any push higher will be disastrous for the current energy sector. Saudi Arabia knows they are in trouble long term, and hence are trying to push prices lower. Their cash cow will be over within 10 years if they cannot get prices much lower, and they know it.

Hydrogen cars are “within” reach technologically. Electric cars can run at 30 cents a gallon equivalent. Wind energy can replace coal easily and T. Boone is investing $2 billion in it now. Nuclear power is another far cheaper option. This bubble WILL implode. I just do not know exactly when. If you think you are investing in these stocks for the long haul, you are sadly mistaken. Most of these stocks will be FAR lower in 5 years than they are today, IMO. Some marginal players may not even exist or barely hanging on. Things generally take longer to develop than imagined, so my time-frame could be off a tad, but make no mistake. This will not last. Forget the “environment Green movement”. This is about money. There are cheaper alternatives at these prices, it will just take a a few years to get the ball rolling.

Written by Tom@StockBlade.com · Filed Under General Investing/Trading Commentary

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One Response to “Sector Call: Energy Stocks Are Trades, Not Investments”

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