It was the story of the week. Energy prices are rising and even skyrocketing in some parts of the world. There is the fear that energy shocks could turn into an energy crisis. We are already at crisis stage in Europe. Readers might feel this risk in two or three different ways. Some investors will ignore the event. So they are not ‘feeling it’. Those who are concerned but have not hedged the risk might feel some anxiety. Others who are already profiting handsomely from the big moves in oil and gas and pipeline stocks (or ETFs of same) might have a guilty smirk on their face. They may have hedged away that risk. That hedge can also remove the anxiety. Others who are heavily invested into oil and gas welcome higher prices. It’s the story that won’t quit. There’s tons of energy (and much more) on the Sunday Reads.
My MoneySense weekly looked into the potential of an energy crisis, plus bonds taking down stocks, the U.S. going ‘broke’, and a slick new trading app from Questrade.
QuestMobile will take on Wealthsimple Trade. It’s worth noting the risk of trading U.S. stocks and currency conversion charges. Trades are “free” at Wealthsimple Trade, but keep in mind that there are currency conversion charges when clients trade U.S. stocks. You could end up paying almost 2% on each side of a trade. Free can become very expensive. Mostly, you should avoid currency conversion charges.
Supply and demand
The backstory for oil is that we have increasing demand and the potential of stagnating or declining oil and gas production over time. It’s all about supply and demand of course. The same events that lead to an energy crunch, could turn into an energy crisis, and also propel those oil and gas prices. Obviously, those higher prices are good for producers and they do not hurt the cause of the pipelines that move the oil and gas around North America.
I was almost a year ago that I put the potential for investing in oil and gas stocks on the table. Keep in mind that it is/was not advice. As a self-directed investor you will read and decide. But let’s just say that the oil and gas investment thesis of Eric Nuttall of Ninepoint Partners has played out to script.
I was slow to eat my own cooking, but a few months later moved into iShares energy ETF, ticker XEG. That said, and as I added to that MoneySense post.
Year-to-date, iShares XEG is up about 62%. Nuttall kindly reminded me his Ninepoint energy fund is up 141%, to Wednesday, Sept. 29, 2021.
I also hold a very modest position in the Ninepoint energy ETF. I plan to throw more portfolio income at that fund over the next few months. Eric offers that the fund is 95% oil focused.
Hedge or not?
Obviously, I think that it is wise to hedge the risk. And even a modest position might offer some very good protection in an energy crunch or crisis. Commodities can be explosive when supply and demand gets out of whack.
But again, I’ll leave that hedge decision to you. It’s a personal call.
Gold and bitcoin might be explosive and protect against inflation and any ongoing currency debasement “issues”. Here was a great (yet obvious) insight that I had to share.
I’d suggest that you read how to protect your portfolio against inflation. You’ll see some interesting charts in there, such as …
And that brings up another ‘coincidence’ with oil having been a major driver of stagflation in the 1970’s and early 80’s. Supply side inflation (input prices) can be sticky. We also have supply chain issues contributing.
Scott Barlow of the Globe and Mail shared an interesting perspective from Bank of America. It makes a case for why this decade might remain inflationary.
It was also interesting to see that perspective land on The Permanent Portfolio. The idea of course, is to be prepared for everything. It’s the all-weather portfolio approach that you’ll find in the new Balanced ETF Portfolio.
No one knows what the future holds. But if you do choose to protect it is a simple process. And certainly if one is young and brave, they might be able to afford to go heavy on the stock assets and simply take advantage of lower stock prices when they arrive, and the ability of stocks to cover inflation over much longer periods.
Once again, the risks are much different in the accumulation vs decumulation stages.
More Sunday Reads
Batting lead off, please have a look at the first blog for Passive Prairie F.I.R.E. A look at the September income stream. The more who share their approach and results the better. Welcome to the blogosphere.
And on a Handful of Thoughts, the story behind the numbers on how they paid off their $342,000 mortgage in under 5 years.
Here’s a great collection of reads on My Own Advisor, the Weekend Reads of course.
From that, I will repost the great resource known as Dividend Growth Investing and Retirement. But be sure to check out that full Weekend Reads from Mark.
Million Dollar Journey also announced the launch of the Questrade App known as QuestMobile.
It was another great week on the Findependence Hub, you’ll find posts from Robb Engen, Mark Seed and other entries covering gold and 5 Harvest ETFs offering 5% yields or more.
Here’s a great topic from Mike The Dividend Guy. Investing only in Canada: the good the bad and the ugly.
Want a free iPad? GenYMoney is keeping us up to date on the Canadian bank promo offers.
Craig has opened up an account at Questrade and some of those crap fund proceeds will soon be on the move to a better place. He is stuck in some AGF DSC funds, as well.
If you’re taking a shine to Silver (a great commodity IMHO) here’s the best silver ETFs on Savvy New Investors.
Some other great reads – the markets don’t make sense.
Brian Belski of BMO thinks that Canadian stocks could outperform U.S. stocks for the remainder of the year.
Thanks for reading. Don’t forget to follow this blog, follow me on Twitter and sign up for my Facebook page. We’ll see you in the comment section. Got energy in your portfolio?
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Consider Justwealth for RESP accounts. That is THE option in Canada.
Make your cash work a lot harder at EQ Bank. RRSP and TFSA account savings rates are at 1.25%. You’ll find some higher rates on certain GICs. They now also offer U.S. dollar accounts.
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