Author: Ben Dickey,
BSG&L Financial Services LLC
Covestor models:
Pure Growth and
Growth Plus IncomeThe third quarter of 2011 was not a good one for investors. Fear about European debt and a slowing in emerging markets sparked real fears of a global recession. As a result, the markets sold off steeply in the quarter.
One of the concerns investors have is that government policies will have a dramatic impact on the global economy. This causes uncertainty. It is difficult to predict what governments will do and more importantly, whether it will work. I do not believe that the international banking system will allow a financial lock up like 2008. Many of the problems are similar, including the huge amounts of debt. However, the difference this time is that this is sovereign debt, as opposed to private debt in 2008.
I have discussed the sovereign debt problems with the PIGS in previous market commentaries. I believe the markets have over-corrected. The markets have dropped to a point that they are pricing in a belief that all of these countries are as bad off as Greece. Several of the other countries have already taken steps to correct their problems.
Oil has risen from a low in the low seventies per barrel to the low nineties (WTI). Copper fell to the low $3/pound and has risen back to the high threes in the last 30 days. As the world economies expand, slowly in the U.S. and slower in Europe, the emerging markets are growing at a much higher rate. The phenomenon of the growing middle class in the developing markets continues.
Saudi Arabia has not been able to meet its 10MM bbl/day commitment, shipping around 9.5MM bbl/day. The International Energy Agency stated that the Non OPEC producing countries will not increase production in 2012. These items continue to convince me that Brent Oil Prices will average $125/bbl over the rest of this year and move higher next year.
Several investment ideas related to that continuing demand would be SeaDrill Ltd.