Over the past six weeks, crude oil prices have soared more than 24%.
That’s the biggest jump we’ve seen since January 2022, in the lead-up to Russia’s invasion of Ukraine:
(Click here to view larger image.)
That rise shouldn’t come as a surprise if you’ve been listening to me.
I’ve pointed out for the past year that supply and demand are totally out of whack.
Over the last year alone:
- OPEC has cut over 3.5 million barrels of oil production in a few months.
- Demand continues to creep higher — set to outpace supply by millions of barrels.
- And the ace in the hole … China’s economy hasn’t even begun to heat up yet.
Yet oil prices kept falling … from $105 in April of 2022 to a low of $67 at the end of June.
It didn’t add up. Oil prices should be rising, not falling!
Now Mr. Market is finally starting to snap out of it…
I hope you’re ready for higher oil prices.
Oil’s Comeback
The bull market in oil is just getting started!
Oil is trading around $83 per barrel and should be heading higher.
I’ve been recommending oil and gas companies to my readers all year. I even shared a free report with you about it.
It was clear that green energy wasn’t taking over the world as soon as everyone thought. And fossil fuels aren’t going anywhere anytime soon.
I wasn’t the only one to think so…
Warren Buffett backed up the truck to buy oil stocks.
Over the last two years, he built a $21 billion stake in Chevron, the world’s seventh-largest oil company … Berkshire now owns 7% of the company.
He didn’t stop there.
He’s built a stake worth $14 billion in Occidental Petroleum (NYSE: OXY).
Berkshire Hathaway now owns almost 25% of the company.
It’s one of his biggest investments in YEARS. But there’s one company that I believe Warren would buy if he could.
But it’s reserved for Main Street investors like you.
Buffett’s 1st Choice
When Warren Buffett buys $14 billion in Occidental shares — a full quarter of the company — that’s only about 4% of his portfolio.
Anything less wouldn’t even move the needle.
The same goes for some of Wall Street’s biggest hedge funds and investment banks.
If they can’t invest a considerable allocation from their assets under management, it won’t move the needle on their performance. It’s not worth their time.
These are the stocks Buffett truly wishes he could buy. He said:
“It’s a huge structural advantage not to have a lot of money. I think I could make you 50% a year on $1 million. No, I know I could.”
And when I look at the tailwinds in the oil market, I can see why he’d want in.
I can’t tell you when. But over the long term, I have a good idea of what should happen.
Oil is going to move higher.
Whether it be tomorrow, next month or next year.
Too much demand chasing too little supply equals higher prices.
Nothing more complicated than that.
So don’t sleep on this opportunity when Mr. Market is handing it over.
Here are a few ways to profit from the tsunami tailwind of fossil fuel:
- Follow Buffett’s lead and buy Occidental Petroleum (NYSE: OXY). I recommended it to my Alpha Investors in April 2022.
Or if you want to invest in the company I believe Buffett would love to buy if he could.
- One small oil and gas company is gushing with cash — over $500 million in free cash flow last year. They’ve hiked dividends six times in the last 18 months.
It’s 1/100th the size of Chevron, so big investors can’t touch it. You probably won’t hear about this company on CNBC either. I’ll share the full story with you here.
Then…
- Sit back and do nothing. You can sleep better at night knowing you’ve bought a quality business in an industry with a huge tailwind.
It doesn’t get any easier than that.
Regards,
Founder, Alpha Investor
What’s Happening in Mortgageland?
Yesterday, I mentioned that bond yields were bumping up against their highs from a year ago.
Well, so are mortgage rates. At just shy of 7%, the average new 30-year mortgage is close to 20-year highs.
This is something I’ve written about for the past year. Money is not finite. No one has an unlimited budget. And if you’re paying an extra couple hundred dollars in housing costs due to higher mortgage rates, that’s $200 you don’t have to spend elsewhere, or to save.
(Speaking of the savings rate: Today’s savings rate of 4.3% is about half the average savings rate of 2019 and early 2020 — before the COVID-19 pandemic skewed the numbers. So yes, we have very real proof that higher costs are coming directly out of Americans’ would-be savings.)
Now let’s take a look at what a typical new mortgage might look like.
The average sales price for homes being sold today is around $495,000 today. The average down payment for a first-time buyer is around 7%. So on that $495,000 house, our potential buyer would be borrowing $460,350.
Allowing a little wiggle room for varying property tax rates and insurance rates, the monthly payment here is about $3,700 per month, or $44,400 per year.
In the first year, interest alone would amount to about $31,615, with most of the rest going to taxes and insurance. Your actual principal reduction would be a measly $4,767, or about 1% of the mortgage.
Now, I’m never going to tell you not to buy a house. I like owning a house. I hate paying rent, and being the typically acquisitive American, I like to call something mine.
But reducing my debt by a mere 1% per year doesn’t sit right with me.
I also don’t like the fact that I would likely lose money if I needed to sell the house sometime in the next three to four years due to closing costs and a lack of equity in the property.
Unless you find a house that you absolutely cannot bear the thought of living without — and that you plan to stay in forever — you might want to keep renting for the time being.
The math in the current economy is just not working for me.
However, if you want to invest your money in something with consistently better odds, even in this climate, Charles Mizrahi is more bullish on the oil market than he’s ever been.
As he said today, oil prices are on the rise. But there’s still time to get in on this as an investment opportunity.
To get his #1 recommended oil stock (he’s predicting 1,000% gains within the next few years), go here for more details.
Regards,
Charles SizemoreChief Editor, The Banyan Edge