Livermore Partners’ David Neuhauser interview with CNBC, discussing that energy is a sector that screams value while the rest of the market is still in a bit of a malaise.
Dear Partners and Friends,
It’s already been a wild year. Especially this past month. Still, we expect volatility to continue and the potential for further downside to equities as the FED looks to re-calibrate interest rates in a high inflation world. More flames out today with CPI ticking up to 9.1% which was a huge negative print. It helped provide further market weakness for both equities and the short end of the Treasury curve. Something that is now deeply inverted.
Q2 2022 hedge fund letters, conferences and more
As recently described, Brent crude oil is our favorite asset especially by owning energy companies tied to it via cash flows (namely Jadestone, Vista and a handful of others). Overall, our commodity book was hit hard in June given this was the one area of strong gains that is now retrenching. Still, we remain steadfast in owning this group as there is no better place to be. Current and future oil generating cash flows today reflect valuations will make for exceptional investment prospects in light of this turmoil. So next to cash, it is THE asset class to own for upside as well as help provide some shelter.
Below is our latest interview from CNBC reflecting on energy and where we see its potential. It may take further time to unfold given recent fund liquidations, but one should be comforted by the fact inflation is in a "structural shift" and will not retrench much. Therefore, owning an asset class that creates above average yield and insulates against further inflation shocks is our single best idea.
The big question is whether the FED will send the economy into a tailspin with strong interest rate hikes. Many are too content that a soft landing is forthcoming and lead central banker Jay Powell will blink when faced with the choice of allowing inflation to run hot vs. sending the economy into a tailspin. Either way, the road ahead will be bumpy at best.
Today, the US Dollar is extremely strong which is hurting exports and thus impacting corporate earnings. This will not change soon so I expect more trouble ahead in the next 6-12 months as a much tougher backdrop for investors take hold. Buckle up...
VTY,
David Neuhauser
