Random Thoughts on Commodities

The world has been hit with a sundry of cataclysmic activity over the past few weeks. Hong Kong hit with 2 major typhoons in a month, shutting down the stock exchange briefly, Southeastern US getting ripped apart by a multitude of cat 5 hurricanes, and of course, North Korea and their hydrogen bombs. Death and destruction is rampant everywhere but on the optimistic side, I think this may be the catalyst that may put oil & gold prices in motion.

Hurricane season is always a positive for oil & gas prices as much of the supply in the Southeast US goes offline. According to GasBuddy, about 15% of all US refining capacity is currently offline, with that number expected to rise. Naturally, that is bullish for refinery stocks but I also understand that the hype is usually short-lived. Typically, the end result is gasoline prices surge but then end up back where they were as things revert back to normal. Having said that, commodity prices, namely gold and oil, have consolidated quietly for the past year and a half and look to be finally stabilizing.

Gold is an investment I don’t feel comfortable with for a number of reasons so I will not get involved, but I do think it is going higher. It is a safe haven for when ‘shit hits the fan’, and tends to appreciate with inflation. Invest in gold via GLD, and not the other North American miners. There is too much chicanery going on in mining companies, and their stock prices generally trade like shit. Oil, on the other hand, which I have been particularly bearish on, looks stable here and could really start to pick up, and fast.

I like RDS especially here for the long run, as a play on stable oil prices. The 6%+ dividend doesn’t hurt either. I am also a big fan of non-american Big Oil operating in the Middle East and South East Asia, as from what I hear through the grapevine they have focused the past few years diversifying heavily into other sources of alternative energy which they should reap the rewards in a few years time.