The market finished yesterday with substantial gains. The market opened this morning in the green and is holding steady. So what’s up with that given the Fed meeting this week and given the probability that Mr. Bernanke will begin to turn the liquidity spigot to the off position?
- U.S. stocks edged up at the open on Tuesday ahead of the start of a highly anticipated Federal Reserve two-day meeting, while inflation data supported the case for the Fed to start to reduce its stimulus measures.
As I have written, turning the spigot off is a good thing and the market understands this, despite what the media has been saying since May when the Fed first announced its plans. Turn the off valve slowly, Mr. Bernanke, and all will be fine with the market.
Yesterday, a pal of mine asked me about stocks to look at regarding fracking. I suggested she look at companies that make fracking equipment. I suggested this because a) fracking is not going away; it will only increase in US and around the world and b) the energy companies that are doing the fracking are already priced out.
Anyway, I did a little research on the subject because it occurs to me I might just be correct. Here is a quick sampling of my findings.
- Countries such as Argentina, Russia, and Algeria hold shale oil deposits that could be even more bountiful than the regions at the center of the U.S.’s energy revolution … a report from research firm IHS has estimated.
- Proposed U.K. government policies to encourage hydro-fracking of natural gas ignited a firestorm of protest this summer, with critics complaining that they were not consulted and that rules will restrict local planners’ authority. But the country appears to have few other options. The United Kingdom is in an energy quagmire that is forcing it to turn to shale gas.
Take a look at USA Compression Partners (USAC). This small company designs, engineers, operates, and maintains natural gas compressor packages.
My cursory review of this topic produced another view on making money. Perhaps, it is not just companies that make fracking equipment that offer opportunity; opportunity might exist in companies that move the natural gas, as well. A company named Boardwalk Pipeline Partners (BWP) is one to check out. Currently, they operate primarily in the US, but that could change as drilling takes off in other parts of the world.
- As the natural gas production boom continues, Boardwalk, with enough natural gas pipelines to span the United States more than 5 times, is primed to take advantage of transporting the fuel.
Another opportunity in the fracking picture is the companies that do the testing for regulatory and environmental purposes.
- Drilling used to be the highest cost component of a well; now it is completions and testing. Today that comes to roughly 54% of the total well cost, versus just 17% in 2000.
I need to do more research on this topic, but I will and I will let you know what I find. A point I want to make overall, though, is one never knows where opportunity might arise. Sometimes, it is in a phone call with a friend who has a thought, an idea about investing in fracking because it is all over the news in these days of high-priced oil, excessive carbon emissions, and the Middle East blowing itself up.
Speaking of the world, I have suggested looking into investing in European stocks because I see opportunity there as well.
- The market puts a price-to-earnings (P/E) multiple of 15 times on the US market, but is only putting a 12 times P/E multiple on Europe’s already-weak earnings. European stocks are positioned to outperform via superior earnings growth if a recovery unfolds.
Trade in the day; Invest in your life …
