What Hurricane Harvey Means for the Energy Sector...
What Hurricane Harvey means for the energy sector... A special interview with Commodity Supercycles editor Flavious Smith... Sjug clears up some 'Melt Up' confusion... The 'Melt Up Millionaire' project closes tonight...
The numbers are nearly unfathomable...
25 trillion gallons of water...
That's roughly how much rain Hurricane Harvey dumped on the Houston, Texas area in less than five days.
And the 51.88 inches of rainfall measured outside the city is the most ever recorded from a single storm in the continental U.S., according to the National Weather Service.
This is more rain than typically falls in six months there... and enough water to supply New York City for more than 50 years, according to ABC News.
More than 30 people have died as a result of the storm, and at least another 30,000 have been forced from their homes.
While the worst of the rainfall has passed, flooding is expected to continue for weeks or even months in some areas. Some estimates suggest the damage could total as much as $160 billion. That would rank it among the most expensive natural disasters in U.S. history.
The loss of life and property is tragic and heartbreaking...
We know many Stansberry Research subscribers live in Houston and the surrounding areas. We hope you and your loved ones are safe, and our thoughts and good wishes are with you today.
What comes next?
In addition to being the fourth-largest city in the country, Houston is, of course, a critical hub in the U.S. energy sector. That industry is suffering its share of the colossal damage done by Harvey...
According to the latest estimates from news service Reuters, Harvey has knocked out as much as 4 million barrels per day ("bpd") – or about 20% – of U.S. oil-refining capacity. And this has quickly rippled through energy markets...
West Texas Intermediate ("WTI") crude oil is on pace for its steepest monthly decline in more than a year. WTI has fallen 8% in August, including 3% since Harvey made landfall last week. This isn't unexpected...
As regular Digest readers know, crude oil inventories have remained stubbornly high, despite significant production cuts from oil cartel OPEC. This decline in refining capacity only adds to these woes. A big source of domestic demand has suddenly disappeared, and inventories could be headed even higher in the near term.
Likewise, less refining means less gasoline and other fuel production. And flooding has closed several ports and shut down pipelines that enable these fuels to be shipped across the country.
We'd expect gasoline prices to rise in anticipation of tightening supplies. And that's exactly what's happened. U.S. gasoline futures have jumped to more than $2 a gallon for the first time in over two years.
Investors are left to wonder, how long will these disruptions last?
What will be the long-term effects on the energy markets? And how will they impact various sectors like refiners, pipelines, exploration and production ("E&P"), and oil services today?
Our colleague Scott Garliss of the Stansberry NewsWire team recently spoke with our resident energy guru Flavious Smith to answer all these questions and more. Flavious is the editor of our new Commodity Supercycles advisory, and no one is more qualified on the subject...
He's a 35-year veteran of the energy business who has worked on nearly all of the most important onshore oil and gas basins in the U.S., including the Anadarko, Appalachian, Denver-Julesburg, East Texas, Gulf Coast, Hugoton, Permian, Powder River, Uinta, Wind River, and the Williston Basins.
He led the development of both the Marcellus and the Barnett Shale assets for EOG Resources (EOG). As longtime readers may recall, EOG is the "best of breed" firm that pioneered the use of the next-generation technologies that unlocked vast quantities of shale oil in the U.S.
And he later served as the chief oil and gas officer and executive vice president at Forestar Group (FOR), building and leading the company's oil and gas operating segment.
If you have any money in the energy sector, you don't want to miss this short interview. Click here to watch it now.
And if you're interested in receiving more great content like this from Scott and his team – including morning market "snapshots," evening market recaps, and up-to-the-minute news, research, and expert commentary throughout the day – we urge you to take a closer look at the Stansberry NewsWire. You can sign up for FREE right here.
'My confidence is shaken...'
By now most Digest readers should be familiar with Steve Sjuggerud's "Melt Up" thesis...
This is Steve's prediction that we'll experience an explosive "blow off" top before the eight-year bull market ends... And some stocks will soar hundreds of percent in the process.
In fact, he believes so strongly in this prediction, he's even launched a brand-new portfolio – what he's dubbed the "Melt Up Millionaire" project – that's designed to help folks make the biggest and safest gains possible.
But Steve has also been clear that speculating on the Melt Up is not without risk. And also by definition, any opportunities with the potential to rise 100% or more in a short period of time will be extremely volatile.
This is why he's emphasized that it's not for everyone... and it's absolutely imperative to follow strict risk-management tools like trailing stop losses. But as Steve explained in this morning's edition of our free DailyWealth e-letter, some readers are still confused. He shared the following letter from subscriber B.B.:
I am a new subscriber to the True Wealth Systems Melt Up Millionaire. Please ask Steve to address why [STOCK NO. 1] is included when the firm's EPS (earnings per share) is [negative] and pays no dividends? [STOCK NO. 2] has a P/E [price-to-earnings ratio] of 74. [STOCK NO. 3] has a P/E of 82 with [a low EPS]. [STOCK NO. 4] has a P/E of 80 with [a low EPS].
This program appears to be VERY high risk with high leverage that can lever down as well as up – [but] that is all that is discussed it seems. My confidence is shaken as I study the recommendations in the program. – B.B.
As Steve noted, B.B. – like many investors – is failing to make an important distinction...
I want to stress something here... There's a difference between volatility and risk.
With any portfolio, we can't control volatility. No one can control or predict the day-to-day moves in a single stock. We are purposefully exposing ourselves to that volatility.
However, we can control our risk. We do this with "trailing stops"...
We put 35% trailing stops on each of our positions. That means that the biggest loss that we're risking on any one recommendation is 35%. And that's a trailing stop, which means that the sell price adjusts based on the stock's "high-water mark." In other words, trailing stops actively work to lock in gains and minimize losses.
This way, our downside risk is limited to 35% or less. Meanwhile, our upside potential is 100%-plus. This is great.
Hopefully this helps you see how we could have a large amount of volatility, but we are limiting our downside risk.
And while it sounds controversial, Steve also explained that focusing on valuations during the Melt Up is likely a mistake. More from the issue...
You need to know two things about valuations in the Melt Up:
- We specifically chose recommendations that have low earnings today, but high earnings-growth potential. These are the ones that will go up the most if the Melt Up unfolds as I expect.
- Valuation isn't what kills a Melt Up. It's a symptom of the end, but it's not the cause of the end.
When we were considering the recommendations for this portfolio, we looked back at previous Melt Ups – and focused on the 1999 dot-com boom. Importantly, the stocks that moved up the most back then were the low-earning, high-potential-growth stories.
In other words, during the last Melt Up, stocks that started out with the highest valuations were the ones that rose the most. Meanwhile, "value" stocks like Warren Buffett's Berkshire Hathaway didn't rise at all.
This means, if you want to profit from the Melt Up, you need to be willing to buy the kinds of stocks we don't often recommend...
Today, we believe that we are approaching a Melt Up like we saw in 1999. And we want to capture as much of that upside as possible. So we are going after the higher-risk names.
When the bubble bursts, we can start to look for values. But that's not where we are today.
This is the idea behind our Melt Up Millionaire portfolio. If I am wrong about this, we have our trailing stops in place. Our volatility may not be limited, but our downside risk is. If our thesis is right, and the market continues to melt up, we are positioned for maximum profit.
I hope that gives you a better insight into my thinking on my Melt Up thesis, and how to maximize profits if I'm right and minimize losses if I'm wrong.
Of course, Steve knows this won't be easy for many folks to do...
That's why he created the Melt Up Millionaire project to begin with... It was designed to take all the guesswork – and as much of the emotion as possible – out of speculating today. It shows you exactly what stocks to own... what percentage of your portfolio to allocate to them... and when to head for the exits.
And if this portfolio doesn't produce weighted gains of at least 100% over the next 12 months, he'll give you full credit to apply to any other Stansberry Research service of your choice. He'll even throw in a full year of his elite True Wealth Systems service for free.
But if you're interested in joining the Melt Up Millionaire project, we must hear from you now. This opportunity ends promptly at midnight Eastern time tonight. Click here to sign up.
New 52-week highs (as of 8/30/17): Apple (AAPL), Aflac (AFL), Global X China Financials Fund (CHIX), WisdomTree Emerging Markets High Dividend Fund (DEM), PowerShares Chinese Yuan Dim Sum Bond Fund (DSUM), Euronet Worldwide (EEFT), First Trust Emerging Markets Small Cap AlphaDEX Fund (FEMS), National Beverage (FIZZ), PureFunds ISE Mobile Payments Fund (IPAY), iShares U.S. Aerospace and Defense Fund (ITA), KraneShares Bosera MSCI China A Fund (KBA), iShares MSCI Global Metals & Mining Producers Fund (PICK), ProShares Ultra Technology Fund (ROM), ALPS Medical Breakthroughs Fund (SBIO), Shopify (SHOP), Guggenheim China Real Estate Fund (TAO), U.S. Concrete (USCR), Verisign (VRSN), and short position in Brinker International (EAT).
A busy day in the mailbag: comments on autos, gold, and our new "Chart of the Moment" feature... and a new subscriber shares his experience with our work so far. Send your questions, comments, and concerns to feedback@stansberryresearch.com.
"You talk about Ford considering selectively ignoring low credit scores when evaluating a car loan. If you remember a few months ago the rating agencies reformulated the credit scores in an effort to boost credit scores. That's when I knew things were getting bad and not just in the auto industry." – Paid-up subscriber Allen Whitmore
"[The Chart of the Moment is a] great addition, really enjoy the NewsWire service." – Paid-up Stansberry Alliance member Steve J.
"Been watching that $1,300 level [in gold] for quite a while keeping with Steve's advice. It looked to be closing over $1,300 and I only had to wait for an hour before the call came from Stansberry. As a matter of fact, the e-mail came while I was loading the truck. I was long 15% 30 minutes before the call. I'm feeling pretty well-educated and on gold hard with $1,290 stop. Low-risk, extra-high reward. Nice work folks. I'm now 25% cash and awaiting the long-anticipated pull-back." – Paid-up subscriber Marty S.
"Hello Porter, Steve, Doc, and everyone else at Stansberry! I personally would like to say thank you! The education, direction, guidance, service, and profits are outstanding for my 4 whole months of investing being self-directed. I have doubled my returns in 4 months from what previously took a year to gain. I'm using a culmination of all three of your thesis. Steve's for the fat pitch, Doc's for the steady, and Porter for the insurance. Then cap it off with Dr. Smith's Tradestops. I sleep very well at night.
"I'm absolutely ecstatic about the future, and very happy with my returns. All of this made possible by all of you. So I personally don't understand how certain individuals can condemn what it is all of you do. Ultimately the personal management is up to them. All the information, pro's AND con's, is all there. They just have to use the education provided to them and apply it! Thank You again!" – Paid-up Stansberry Choice member John Forest
Regards,
Justin Brill
Baltimore, Maryland
August 31, 2017