The well-known phrase ‘May he live in interesting times’ is popularly believed to be an ancient Chinese curse. Apparently, we can thank Robert Kennedy for that. Kennedy used it in a speech he gave in Capetown, South Africa back in 1966. He credited it to the Chinese although there seems to be no written evidence of that being factual. Perhaps he thought it was oriental because of its ‘Confucius says‘ kind of irony.

We’ll get back to that in a minute but first a few words about how Covid-19, aka Coronavirus, aka SARS-CoV-2, aka Wuhan Virus has brought us to some interesting times indeed. So, for this week’s eLetter we shall attribute the saying to just Sum Yung Gai.

The financial markets are, of course, influenced by many things. Typically, especially in a macro sense, they are a reflection of the state of ‘the economy’, which may mean domestic, or International or Global — depending on the context. That observation aside, we also must realize that markets are not always rational and can easily have mini-trends going in opposite directions to larger trends. What should be considered bad news may occasionally be interpreted as good news. Even bad news that turns out to be less bad than expected can move markets in a positive way. Investors and traders are generally of an optimistic nature. That is why they tend to regard markets as a device which can be used to buy the future at a discount. But there is a limit to this optimism.

Since February we have been under siege with daily bombardments of astonishingly negative reports: Increasing virus-related fatalities, skyrocketing unemployment claims, collapsing markets all conspire to challenge our wits. Many of us have been thinking “Boy, the last thing I need is another character-building experience”. But then, in counterpoint to the limits of our optimism, there are also limits to our negativity. After all, one can grow weary of fear.

As promised, let’s get back to Bobby Kennedy’s Capetown speech. In it RFK also had these words: “Like it or not, we live in interesting times. They are times of danger and uncertainty; but they are also the most creative of any time in the history of mankind.”

April 30th is less than a week away. That’s an important date because many states have it set as the end of their Covid19 lockdown. May 4th is a few days later and is also a lift-the-lockdown day for even more states. Our general thinking is that Americans will catch a wave of optimism. We’re anxious to participate.

Ron’s Market Minute – A World Gone Crazy: Oil Markets on Sale!

You have most likely seen some of the effects of the upside-down oil markets. If you’ve driven enough to need to fill your gas tank, you have most likely noted that (even though AZ has some of the highest prices in the USA) still the price per gallon is amazingly low compared to a month ago. 

Given the low price at the pump – can you guess which sector of the US stock market has been the best performing sector since the market low on March 23rd? OK, so I sort of gave that away.  I would have guessed the healthcare sector, and I would have been wrong.  As I checked this morning, the winner is OIL!  The lower price shows oil prices over the past year, but the higher picture shows oil since the markets bottomed.

It seems reasonable to think that the lower bound of oil price would be -100%, but apparently that’s incorrect when it comes to oil futures.  For the first time ever (as far as I can tell) oil prices crashed into negative ranges as the virus reactions crushed all demand for oil. The US benchmark (West Texas Intermediate) traded as low as -$40 a barrel this week (Yes that is a negative number!) – in totally chaotic trading.  Looks like at the moment the world is producing about 10 million barrels per day of oil more than can be used.  And there’s only so much storage space left – and it’s about to run out.  The question becomes ‘how much would you pay to NOT have to take delivery of thousands of barrels of oil?’

On a more personal level, this week we have had calls from clients asking whether to avoid investments in energy at all costs (!) and also calls asking if this was a time to load up on energy at bargain basement prices!  So, is this a dead cat bounce?  Oil companies are incredibly oversold, and there’s likely (my opinion) more pain ahead for the industry.  But fundamentally- the structure for oil is not changing right now.  China is slowly opening up for business and evidence suggests that China has been loading up on the black stuff at really cheap prices.  (A smart move?)  And China is most certainly not the only country that will be back in business- at SOME time! 

So, although there is no demand today, it likely will not be that way forever. It may take some time, but with truly cheap prices, oil is showing some pretty good buy signals. Are we looking for a possible huge-a-mungous bounce! And if so, when?

Is this a massively risky thought?  Or is it a potential gainer for those with patience? 

We’re not sure, but are spending a LOT of time studying the possibilities.

Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite C-262
Phoenix, AZ 85051
Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk
www.denkinvest.com

This weekly article reflects news, commentary, opinions, viewpoints, analyses and other information developed by Denk Strategic Wealth Partners and/or select but unaffiliated third parties. DSWP provides Market Information for illustrative and informational purposes only. If you wish to receive this weekly commentary by email please contact us at 602-252-8700 or by e-mail at lindaw[@]denkinvest.com. If you are receiving this commentary via email and would prefer not to please let us know either by email or phone.

Ronald Denk is an Advisory Representative offering services through Denk Strategic Wealth Partners, A Registered Investment Advisor. He is also a Registered Representative, offering investments through Lincoln Financial Securities Corporation, Member FINRA/SIPC.

Denk Strategic Wealth Partners is not affiliated with Lincoln Financial Securities Corporation. Information in this commentary is the sole opinion of Denk Strategic Wealth Partners. Past performance is no guarantee of future returns. All market related investments involve various types of risk, which include but are not restricted to, credit risk, interest rate risk, volatility, going concern risk, and market risk.

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