Today I sold off nearly all of my oil and gas stocks. I still have a few shares of HEC and a pink sheet stock that's hard to unwind, but that's it. (This is sure going to be painful a year from now when I have to pay capital gains taxes on everything.)
People who followed my recent advice to buy HEC and EPEX lost money. Sorry.
This was a pretty tough decision, because I've been bullish on oil and natural gas since 2000. That's seven years of bullishness. But I suddenly realized that the oil and gas sector has been in a bear market for a year and a half now. I don't want to ride a sinking ship down further.
Some might think "ah ha, here is the final capitulation of a long time bull, and that means the market has bottomed." I sure hope that's not the case. I saw Phil Flynn on CNBC this morning being bullish on oil, so I would think that means I'm not the last person to capitulate. Phil admitted that oil will tank if the economy goes into recession.
The unraveling of the subprime mortgage lending market ought to be a clear signal that a recession is coming. Alan Greenspan said recently that there was a one third chance of a recession. And he has been an eternal optimist for ages. So while, in the long run, oil and gas are great investments because of the Peak Oil theory, in the short run it's a bad investment because of the coming recession.
That's my take. If there is now a huge surge in the oil and gas sector, I surely know that my investing magic is completely gone.