Stockcoach's Corner

It was a good week for my portfolio, as I reversed last week's big loss, and my portfolio hit a new all time high. I noticed today that the stock of ABLE energy has been soaring to the stratosphere. I vaguely remember looking at that stock when it was about $1 as a possible candidate for my portfolio. Clearly I should have bought it, as it it's now over $10.

Oh well. In retrospect, I should have been cognizant of the growing craze for energy stocks. Those investors who were either perspicacious or lucky enough to foresee the surge in oil prices are now basking in riches. The oil market has always been difficult to analyze. Part of the problem is that global petroleum supply is dominated by a few major oil exporting countries. In order to maintain stable oil revenues, these countries typically react by increasing oil output when the price of oil declines. This implies that the global supply curve for oil is downward sloping. If you combine this with an inelastic demand curve for oil, it is almost inenvitable that the demand and supply curves will cross more than once, implying multiple equilibria in oil prices, and hence the volailitity that we observe. On top of that, going long on oil future contracts is about the only effective hedge against further terrorist strikes, which is giving oil prices a further upward lift. All in all, it should have been clear that energy stocks would have been good investments last year. Unfortunately, I failed to see that.