Nor is it just Fed gloom that has the market fumbling for Prozac. The rampaging price of crude has Wall Street in a funk, too.

At the rate we’re going, oil could hit $200 a barrel before the NBA finals finish up. (Okay, maybe not that soon, but that’s the feeling…) There has to be a correction in here somewhere, but the news just keeps piling up and up as traders wait for it.

For instance, The IEA (Int’l Energy Agency) is preparing a “sharp downward revision” to its global oil supply forecast. And Charley Maxwell, known as the “Dean of Energy Analysts” for his decades of work on oil and gas, thinks we are on an irreversible path to $12-$15 a gallon gasoline in the next few years. (How many summer driving jaunts would that put a stop to?)

Things are getting so out of hand that T.R. Raymond, a farmer in Warren County, Tennessee, is switching from tractor power back to mule power to get his crop-plowing done. “We can feed these mules cheaper than we can buy fuel,” Raymond says. “That’s the truth.”

“It’s the way of the future,” his brother Robert adds. Let’s hope not.

Looking a Gift Gusher in the Mouth

But even with oil going through the roof, Wall Street should be grateful… What do I mean?

Only that politicians should be praising and thanking big oil execs in the halls of Congress, rather than shouting and shaking their fists at them. The gusher of profits from big oil companies had saved the market’s bacon up til now. Consider the following from Bloomberg:

Take away Exxon Mobil Corp., Chevron Corp. and ConocoPhillips and profits at U.S. companies are the worst in at least a decade.

Without the $70 billion that oil producers earned in the last two quarters, profits at companies in the Standard & Poor’s 500 Index tumbled 26 percent and 30.2 percent as of last week, the biggest decreases for any quarter since Bloomberg started compiling data in 1998.

Where would the market be without those oil profits? Not a pretty picture to contemplate…

The Way Bear Markets Work

This fresh return to gloom shouldn’t be so surprising. It’s just the way bear markets work; false hopes get ginned up by pollyanna commentators, and investors without a sense of market history start looking for the “all clear” signal with every uptick.

Then reality intervenes, disappointment returns, and bears vanquish bulls once again in the ongoing kabuki dance of fear and greed.

Not everything is in a bear market, of course. The old adage is truer than ever that “there’s always a bull market somewhere.”

For instance, investors have been making money hand over fist in the energy space (naturally), with readers of Sally Limantour’s Taipan letter and Chris Dehaemer’s Crisis Trader racking up 50-70% gains in the space of days to weeks on their investing and trading buys.

There’s plenty more to come where that came from, too… and plenty of opportunity outside of energy to boot.

Wise Beats Clever

People get hopeful in bear markets and try to pretend reality isn’t what it is. That’s just what they do. This creates opportunity on the short side — or, barring that, opportunity to sit back and avoid the mess.

Meanwhile, in those markets where strong bullish trends apply — which today means areas like energy, precious metals, the commodity currencies, “cleantech,” agriculturals, and so on — the real trick is a focus on not being clever, but being wise.

Or, to put it another way, being wise often means resisting the temptation of being clever. Sticking to the facts and letting the trends play out isn’t always the cleverest or most fashionable thing; but, more often than not, it’s the most profitable thing.

There are few pretty clear trends at Taipan that we’ve believed in for a while now (and continue to believe):

• Emerging markets will continue to grow by leaps and bounds, and will offer amazing long-run opportunity pretty much regardless of what happens the West.
• Thanks to a tough supply/demand equation, fossil fuels in general will grow more scarce and more precious, no matter how many production band-aids are slapped.
• The U.S. will ultimately be forced to print its way out of the current fiscal mess, flooding the world with paper dollars on a scale never before seen.
• That in turn will send gold to levels never before seen… well above $2,000 an ounce and beyond.

These things we know to be true — not because of some mystical divination formula or all-seeing crystal ball, but because underlying conditions make it so. The script has been playing out like clockwork not for weeks, not for months, but for years and years… and all the drivers are still there, and if anything, stronger than ever.

It takes wisdom, rather than cleverness, to keep a cool head and maintain a clear perspective. The good news is there are more big profits ahead — potentially the most stunning profits of all — on both the long and the short side. We’ll be here to help you grab them.

by Justice Litle, Editorial Director, Taipan Publishing Group

Source: Welcome to the Party, Pal

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