There's only one "perfect asset" to combat all the bad news that might come, says this strategist

There’s only one “perfect asset” to combat all the bad news that might come, says this strategist

Ahead of that, stocks fall after Ford warns of high supply costs, on the heels of FedEx’s FDX
caution on earnings last week.

The dollar and cash have been among the most popular havens for investors as they navigate recession risks with higher rates and higher inflation alongside a brutal war in Europe.

But our call of the day by Warren Pies, co-founder and strategist at 3Fourteen Research, sees energy as the coverage for any bad news in the pipeline. As he notes, after years of moving in opposite directions, stocks and bonds have fallen together.

“I think you just have a lot more potential outcomes in the future now where stocks and bonds are positively correlated. There are very few assets that can hedge the risks that are there. And I think the energy is the perfect asset,” Pies said in an interview published last Friday with Real Vision.

And while the Fed may try to hike until it drives down energy prices — a major reason for soaring inflation — it might not succeed because it “cannot have ‘impact on the main driver of oil right now’ – geopolitics, Pies said.

“If we move forward with fully sanctioning Russian oil and really getting out of this stalemate that is happening right now and positioning ourselves, the world is going to run out of a lot of oil,” and that will create “one hell of a recession.” , did he declare. “Oil is going to do its own thing… That’s why you need to have exposure to oil through energy in your portfolio.”

As for types of oil companies, Pies advises to keep it simple. “You don’t need to take on any company-specific risk or beta here. Buy the barons, the big energy companies, the liquid energy companies.

“If you want to be a little bit different or off the benchmark, we still like the large-cap Canadian producers because they more or less have lower cost of production and lower maintenance investment,” he said.

What he suggested to clients was a 10% to 20% energy position, given that the sector represents 5% of the S&P 500 SPX,
then reduce the rest of the portfolio to quality companies. “You’re just trying to avoid unprofitable tech stuff,” Pies said.

The strategist sees a pattern similar to what happened after the last tech bubble between 2000 and 2005, when markets entered a new secular commodity bull market, and quality plus energy lagged in the market, especially in the technology space. He sees this similar setup unfold over the next year.

Learn more about the sector: Four reasons why you should buy energy stocks now if you’re a long-term investor

Lily: Stocks could be heading for more pain as the second half of September is historically ‘very bearish’

Wondering if the stock market is looking down, Pies said if the S&P 500 hits the 3,600 quarter, it would start buying. “We did it last time. On June 16, we issued a report to our clients after being bearish all year, saying to put about 25% or 33% of your capital back in the market here. And if we get there again, then we’ll make the same move.

And in the worst case, the S&P 500 falls to 3200? “We could be another 10% lower, but if you can’t handle a 10% pullback in that sector, you’re in the wrong sector,” Pies said.

Hear Ray Dalio at the Best New Ideas in Money Festival on September 21-22 in New York City. The hedge fund pioneer has a strong opinion on the direction the economy is taking.

The steps

DJIA Stocks


fall, with Treasury prices BX:TMUBMUSD02Y

also falling and CL oil prices
also directed south. The DXY Dollar
got another big boost and bitcoin BTCUSD
sits at just under $19,000.

The buzz

Ford F
is down in pre-market after warning that inflation has pushed up supply costs by $1 billion, with parts shortages leaving more cars unfinished, although the automaker is sticking to its forecast annuals.

SPAC ‘King’ Chamath Palihapitiya Terminates Two IPOD Vehicles

after failing to find the target companies in time.

Manufacturer of home fitness bikes Peloton PTON
is launching a $3,195 rowing machine.

AAPL Apple
increases the price of apps and in-app purchases in parts of Asia and in all countries that use the euro. Stocks slide.

The Swedish krona SEKUSD
is down even after the Riksbank raised interest rates 1% more than expected. Along with the two-day Fed meeting that begins on Tuesday, the Bank of England, Swiss National Bank and Norges Bank will also meet this week.

New data showed housing starts were strong in August, but building permits fell.

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“What would have been a major disaster a few months ago has proven manageable so far,” DWS strategists note, referring to high energy prices in Europe, especially Germany after Russia virtually stopped gas exports.

They say it’s for two reasons: Germany is increasing gas storage faster than expected, and consumption has fallen remarkably, as shown in their graph below. With one or even three difficult winters ahead, “we now see how adaptable western industries are in the face of extraordinary pressure,” says Martin Moryson, chief economist for Europe.


Lily: Germany eco. minister says natural gas storage will be ’empty’ after winter

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