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Valued Contributor

XLE: Giving Up On The Energy Sector

 

An SA article on the prospects of energy does not paint a rosy picture for energy. Snippet below.


“I have read projections for how short the oil price war might be and how oil prices and oil equities will rebound. Many are being made by those who have suffered great losses in the oil sector this year and over the past few years. As such, they appear to be confirmation-biased estimates. The long-only energy equity articles over the past few years have yielded large losses for those who took that advice.
The energy sector, as represented by XLE, is up against what may be an insurmountable obstacle. The building of an oil glut now could take many years to work off. I would discourage false hopes of a rebound in the oil and gas sector, and an investment in XLE.

https://seekingalpha.com/article/4332401-xle-giving-up-on-energy-sector

 

MLPs? Infrastructure investments? Whenever I read an article or post which advocates picking the "best of show" in this sector I picture going shopping for a new car at a demolition derby and picking the one with the most fenders on.

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Re: XLE: Giving Up On The Energy Sector

Right on queue:

"New York, March 20, 2020 – UBS Investment Bank today announced that, following the occurrence of a Stop
Loss Termination Event with respect to the ETRACS ProShares Daily 3x Inverse Crude ETN linked to the Bloomberg
WTI Crude Oil Subindex ER due January 4, 2047 (the “Securities", Ticker: WTID, CUSIP: 90274E125), UBS has
elected to exercise its Acceleration Option with respect to the Securities.

As disclosed in more detail in the prospectus supplement relating to the Securities, all outstanding Securities
will be redeemed and holders will be entitled to receive the “Stop Loss Redemption Amount”, calculated in
accordance with the terms of the Securities. Payment of the Stop Loss Redemption Amount will be made on
the Stop Loss Redemption Date which is expected to be March 26, 2020.

The Stop Loss Redemption Amount for the Securities will be equal to the Current Principal Amount of the
Securities at the close of trading on March 20, 2020."

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Re: XLE: Giving Up On The Energy Sector

I remember a few years ago someone with a keyboard at SA recommended that LINE at $6 was a no brainer. I later sold it for 60 cents and paid tax on some bond that they didn't have to pay back so it was actually income to the unit holders. So that's my take on mostly anonymous posters at SA.

In regards to oil - the vast majority of vehicles still run on gas or diesel. I don't see plastic containers disappearing from stores. I don't doubt that oil won't be what it was in the future but I believe it's going to come back from current levels.

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Re: XLE: Giving Up On The Energy Sector


@MNfish wrote:

I remember a few years ago someone with a keyboard at SA recommended that LINE at $6 was a no brainer. I later sold it for 60 cents and paid tax on some bond that they didn't have to pay back so it was actually income to the unit holders. So that's my take on mostly anonymous posters at SA.

In regards to oil - the vast majority of vehicles still run on gas or diesel. I don't see plastic containers disappearing from stores. I don't doubt that oil won't be what it was in the future but I believe it's going to come back from current levels.


 

 The article is simply an opinion piece without any buy recommendations and it was not published anonymously.

There have also been many "no brainers" recommended by posters we are all very familiar with that have been expensive lessons for those who took the hook.

 I thought the article did a good job of pointing out the obvious. Energy stinks and will for some time to come.

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Re: XLE: Giving Up On The Energy Sector


@Bentley wrote:

@MNfish wrote:

I remember a few years ago someone with a keyboard at SA recommended that LINE at $6 was a no brainer. I later sold it for 60 cents and paid tax on some bond that they didn't have to pay back so it was actually income to the unit holders. So that's my take on mostly anonymous posters at SA.

In regards to oil - the vast majority of vehicles still run on gas or diesel. I don't see plastic containers disappearing from stores. I don't doubt that oil won't be what it was in the future but I believe it's going to come back from current levels.


 

 The article is simply an opinion piece without any buy recommendations and it was not published anonymously.

There have also been many "no brainers" recommended by posters we are all very familiar with that have been expensive lessons for those who took the hook.

 I thought the article did a good job of pointing out the obvious. Energy stinks and will for some time to come.


Today’s WSJ  B10 reports that texas Oil industry regulators have been talking to OPEC about reducing production in the largest oil producing state. While anti trust laws prevent a binding agreement with OPEC, Texas regulators could order a curtailment of oil production in the state. The article noted that SA cannot keep up its price cutting for long because it needs oil at 60 to fund its ambitious reform program.

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Re: XLE: Giving Up On The Energy Sector


@Intruder wrote:

@Bentley wrote:

@MNfish wrote:

I remember a few years ago someone with a keyboard at SA recommended that LINE at $6 was a no brainer. I later sold it for 60 cents and paid tax on some bond that they didn't have to pay back so it was actually income to the unit holders. So that's my take on mostly anonymous posters at SA.

In regards to oil - the vast majority of vehicles still run on gas or diesel. I don't see plastic containers disappearing from stores. I don't doubt that oil won't be what it was in the future but I believe it's going to come back from current levels.


 

 The article is simply an opinion piece without any buy recommendations and it was not published anonymously.

There have also been many "no brainers" recommended by posters we are all very familiar with that have been expensive lessons for those who took the hook.

 I thought the article did a good job of pointing out the obvious. Energy stinks and will for some time to come.


Today’s WSJ  B10 reports that texas Oil industry regulators have been talking to OPEC about reducing production in the largest oil producing state. While anti trust laws prevent a binding agreement with OPEC, Texas regulators could order a curtailment of oil production in the state. The article noted that SA cannot keep up its price cutting for long because it needs oil at 60 to fund its ambitious reform program.


 

 Hopefully, SA and Russia will allow prices to rise. Many energy sector investors have been hurt for years and deserve a break. SA and Russia have our producers, infrastructure, and refiners over a barrel and they are loving it.

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Re: XLE: Giving Up On The Energy Sector

 

I have been following the energy space CLOSELY for the last 52 years.

In year 2008, my portfolio was 42% Energy (thanks M* XRAY Tool), and energy was the LAST space to go down in price during that bear market time.  Energy was a goodly reason I could retire early.  But I have been exiting in last five years, and in January sold lots more...and Feb...and finally exited a toehold in market downturn.  (Note most of us still own some Energy as it is owned by tons of mutual funds, such as S&P500 index fund)

In last half decade...fracking was developed and has been coming on strong...TOO STRONG.  The business model was for small companies to borrow lots (junk bonds), frack and deliver to market, and pay junk bond interest.  Trouble is, they cannot stop producing, or they go bankrupt.  For awhile, production kept exceeding industry yearly estimates.

The frackers simply brought too much to market.  The usual thing is Saudi drops prices way down,and such edge players go bankrupt.  This was done a couple years ago, but IMO oil not down far enough (usually $10/barrel historically, every decade) nor long enough.  So this time, Saudi is flooding market and seems oil will be down enough, and long enough, to put a lot of frackers  (and others) out of business.  In Jan I had lunch with poster richardsok, and stated IMO , with COVID, Saudi should INCREASE PRODUCTION (not decrease) to drive out the frackers.  To my surprise , they and Russia did.  So I endorse the Saudi move.

But while companies go bankrupt, the oil does not.  So Exxon types swoop in buying up broken companies, getting the oil, and MOVING IT INTO RESERVES.  THEY DON'T PRODUCE IT.  Expect next year to be full of this activity.

Then we have the ESG Movement...long story.  share ownership discouraged.

To me, oil is not a supply/demand problem.  It is a production/demand problem.  Surely, if every company brought to production all its reserves, oil would flood the world.  Now we have a demand collapse due COVID, albeit will pass sometime.  I disagree with article that this will take years to resolve.  Production is cut by simply turning off a valve.  Can be stopped tomorrow.

There is an old saying in Texas: "Rich is not defined by who discovered and produced oil; Rich are those who own it, after the collapse!)

Another saying: Everything at a price.  So I will keep closely watching oil, and likely will be back in.  Why?  Because until COVID19, the world DEMAND for oil was still rising!!  Oil will continue in use for many, many decades.  Cigarette companies went through the same experience.  For them, EVEN THOUGH CIGARETTE USE DECLINED IN USA, when their stock prices got low enough, the cig companies were great holdings.  Decades long total return, great.

During next year, Energy Co dividends will be cut; watch for all the bankruptcies.  But consider, the oil is always owned by someone.  Production will get below demand usage.  Oil prices return, if not go way up.  Companies start increasing dividends.  Energy stocks may zoom!  Or, as a minimum,  be a great dividend-paying holding for retirees...far better than 1%, 30 year US Treasury bonds.

R48

 

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Re: XLE: Giving Up On The Energy Sector

I drive 10 miles into Ohio to buy gas, which is typically 20-40 cents/gallon cheaper, given state gas tax rates.  We stop at Dairy Queen for a $6 lunch and a blizzard there as well.  Yesterday, we filled up at $1.65/gal.

I saw an opinion piece that someone expects gasoline to get down to its all time historical low, inflation adjusted, at that level.  I remember paying less than 30 cents/gal back in the 70s.

1970   Economy / Prices    



Economy
President: Richard M. Nixon 
Vice President: Spiro T. Agnew 

Population: 
205,052,174 
Life expectancy: 70.8 years 

Dow-Jones 
 
High: 842 
Low: 669 

Federal spending: 
$195.65 billion 
Federal debt: $380.9 billion 
Inflation: 6.5% 
Consumer Price Index: 38.8 
Unemployment: 3.5% 

Prices
Cost of a new home: $26,600.00 
Cost of a new car: 
Median Household Income: $8,734.00 
Cost of a first-class stamp: $0.06 
Cost of a gallon of regular gas: $0.36 
Cost of a dozen eggs: $0.62 
Cost of a gallon of Milk: 1.15
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Re: XLE: Giving Up On The Energy Sector

What Saudi's are doing, getting frackers out of business has an unintended environment benefit as well based on what i read. So seems like a great move that helps everyone. ( I have no knowledge of this business except for headlines i read)

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Re: XLE: Giving Up On The Energy Sector

 

                                                      XLE                SPY

Start date:12/22/199812/22/1998
End date:03/20/202003/20/2020
Start price/share:$23.27$120.69
End price/share:$25.86$228.80
Starting shares:429.8282.86
Ending shares:653.70120.06
Dividends reinvested/share:$24.49$60.26
Total return:69.05%174.69%
Average Annual Total Return:2.50%4.87%
Starting investment:$10,000.00$10,000.00
Ending investment:$16,901.82$27,475.05
Years:21.2521.25

 

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Explorer ○○○

Re: XLE: Giving Up On The Energy Sector

Why is gas 3.35 here in CA and 1.65 in ohio?

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Re: XLE: Giving Up On The Energy Sector


@waffle wrote:

Why is gas 3.35 here in CA and 1.65 in ohio?


My guess is that you pay $1.50/gal in state gas tax!  Thank you Newsom et al!  My son, whom I talked with this morning, filled up at $3.25 a few days ago.  He lives in Fallbrook, about an hour north of San Diego.

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Re: XLE: Giving Up On The Energy Sector


@waffle wrote:

Why is gas 3.35 here in CA and 1.65 in ohio?


Because Ohio is overpriced!  Checkout South Carolina.

R48

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Re: XLE: Giving Up On The Energy Sector

 

Bentley, you are cherry picking start dates.  While perhaps factual, also misleading.  

How about my start date, owning Vang'ds Energy funds since inception.  M* Charts only go back to 1984, but even then, $10,000 in VGENX grew to $384, 000 in later 2018.   Mucho more if owned longer.  But not as long/good as my holding VWELX since 1953...and still owned!

R48

 

 

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Re: XLE: Giving Up On The Energy Sector

If the Texas regulators + OPEC + Russia agree on production cuts, expect a furious rally like you have never seen. Energy sector is the most hated in the world next only to the gold sector (GDX and GDXJ) in 2016 as no one wanted to own the miners at that time. Similar eerie feeling exists in the energy sector now, even more so. 

Once the tide turns, which it will, XLE, XOP, and OIH will have a tremendous rally. Patience is a virtue as the sector is due for a bounce anytime soon. Short interests have come down drastically in the last couple of weeks and XOM and CVX are at unbelievable levels now.  Instead of picking individual companies, my money is on XLE!

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Re: XLE: Giving Up On The Energy Sector


@retiredat48 wrote:

@waffle wrote:

Why is gas 3.35 here in CA and 1.65 in ohio?


Because Ohio is overpriced!  Checkout South Carolina.

R48


Price of gas nationwide depends specifically on state gas taxes, not federal rates, which are the same from state to state.  They also depend on distance to refineries and distance of refineries from oil source.

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Re: XLE: Giving Up On The Energy Sector


@Bentley wrote:

@Intruder wrote:

@Bentley wrote:

@MNfish wrote:

I remember a few years ago someone with a keyboard at SA recommended that LINE at $6 was a no brainer. I later sold it for 60 cents and paid tax on some bond that they didn't have to pay back so it was actually income to the unit holders. So that's my take on mostly anonymous posters at SA.

In regards to oil - the vast majority of vehicles still run on gas or diesel. I don't see plastic containers disappearing from stores. I don't doubt that oil won't be what it was in the future but I believe it's going to come back from current levels.


 

 The article is simply an opinion piece without any buy recommendations and it was not published anonymously.

There have also been many "no brainers" recommended by posters we are all very familiar with that have been expensive lessons for those who took the hook.

 I thought the article did a good job of pointing out the obvious. Energy stinks and will for some time to come.


Today’s WSJ  B10 reports that texas Oil industry regulators have been talking to OPEC about reducing production in the largest oil producing state. While anti trust laws prevent a binding agreement with OPEC, Texas regulators could order a curtailment of oil production in the state. The article noted that SA cannot keep up its price cutting for long because it needs oil at 60 to fund its ambitious reform program.


 

 Hopefully, SA and Russia will allow prices to rise. Many energy sector investors have been hurt for years and deserve a break. SA and Russia have our producers, infrastructure, and refiners over a barrel and they are loving it.


Brantley:

You are overlooking the obvious. US economy benefits from low oil price because US at 20 million barrels a day is largest consumer of oil  (20%) in the world. US is also number 1 producer at 13M barrels a day but 3M is exported. Lower cost of oil benefits US consumers who pay less for gas.

SA and Russia do not have our producers over a barrel because both economies need much higher price of oil to fund their oil dependent economies. SA needs oil over $60 a barrel to fund their reform program. Oil generates 87% of Saudi revenue and 42% of GDP.

Russia gets 60% of its revenue and 30% of GDP from oil. Russian economy is running on bingo fuel with oil below 30.

Russia and SA will need to settle their dispute when OPEC meets in June because neither can continue to sell oil below $30 for much longer without imparing their economies...

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Re: XLE: Giving Up On The Energy Sector


@ElLobo wrote:

@retiredat48 wrote:

@waffle wrote:

Why is gas 3.35 here in CA and 1.65 in ohio?


Because Ohio is overpriced!  Checkout South Carolina.

R48


Price of gas nationwide depends specifically on state gas taxes, not federal rates, which are the same from state to state.  They also depend on distance to refineries and distance of refineries from oil source.


 

ElLobo, in addition to the differences you mention, we also have something else going on out here.  Our gas has to be comprised of 90% petroleum product and 10% corn.  A tanker can't empty half his tank at a gas station in Arizona and then drop off the rest at a gas station just this side of the border.  Has something to do with clean air, I'm told.

On the investment front, I'd like to report that I shorted XLE at $100.10 and am just giddy at the unrealized gains I've racked up.  In fact, since it seems to be acceptable to tout and shout here on Morningstar nowadays, I'd like to urge others to do the same.  So . . . . .

Hop Aboard!!  HOP ABOARD!!!  HOP ABOARD!!!! 

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Re: XLE: Giving Up On The Energy Sector


@cliff wrote:

On the investment front, I'd like to report that I shorted XLE at $100.10 and am just giddy at the unrealized gains I've racked up.  In fact, since it seems to be acceptable to tout and shout here on Morningstar nowadays, I'd like to urge others to do the same.  So . . . . .

Hop Aboard!!  HOP ABOARD!!!  HOP ABOARD!!!! 


So, you mean to say that you were short XLE from June 2014 at 100.10 and been *paying* dividends all these years? If yes, I am impressed as you must have paid about $15+ in dividends (approximately).  Even at these levels ($23), as it hit recently, you were not planning to cover it?

I have seen perma bulls but never a perma bear for 6+ years. Impressive!

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Re: XLE: Giving Up On The Energy Sector


@RainGater wrote:

@cliff wrote:

 

Hop Aboard!!  HOP ABOARD!!!  HOP ABOARD!!!! 


So, you mean to say that you were short XLE from June 2014 at 100.10 and been *paying* dividends all these years? If yes, I am impressed as you must have paid about $15+ in dividends (approximately).  Even at these levels ($23), as it hit recently, you were not planning to cover it?

I have seen perma bulls but never a perma bear for 6+ years. Impressive!


 

I urge you to NEVER pay attention to ANYONE who posts “HOP ABOARD” crap.

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