Thursday Thoughts: What Now High Dow?

Well we hit 20,000 – now what?

As exciting as it has been to get here, the view from the top is kind of scary.  In yesterday's Live Trading Webinar, we shorted the Dow Futures (/YM) at the 20,000 mark and the Dow topped out at 20,069 for a $345 per contract loss but we decided to ride it out since the Dollar is rising and earnings are not that hot so we are expecting at least a small retracement after the 2,000-point (10%) post-election run.  

We're still shorting oil (/CL) at $53.50 and our friends at BP have finally seen the light, stating in their 2017 Energy Outlook that oil demand will grow at just 1.3% per year through 2035 (down from 3.4% in the past two decades) and oil supply will continue to outpace oil demand (due to increased efficiency and renewables), ultimately leading to something I have been saying will happen for years:

The surplus should spur increasing competition between companies and producer nations to ensure their assets were not left “stranded” as demand gradually shifts from oil to cleaner forms of energy. The result is likely to be “quite significant pressures to dampen long-run prices”, according to Spencer Dale, BP’s chief economist.

Stranded oil is a difficult concept to grasp after hearing about peak oil for years but the bottom line is that there is more discovered oil in the ground than the World is EVER likely to use because demand for oil is crossing below supply as alternative fuels gain traction and efficiency increases.  At a certain point, oil will be as much of a fuel as wood is today.  

Stranded Oil

That's a problem for Energy Companies and their investors, as well as for countries that depend on oil for their revenues and that's why the Saudis NOW, are investing $2 TRILLION to move their economy off oil before it's too late.  Meanwhile, they are going to sell all the oil they can for as much as they can but so will US oil holders and everyone else in the World for that matter – it's a warehouse clearance sale and EVERYTHING MUST GO!  

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