Hey There Income Hunter,
Sometimes it’s hard to know what to believe – whether it’s in the Ukraine/Russia conflict, the Johnny Depp/Amber Heard trial or, of course, the market.
While we’re not privy to classified military briefings and (thank goodness) not sharing a bed or megapint with Ms. Heard, we do have something that will provide us real information when it comes to trading – market internals.
Today, I’ll lay out the critical signposts to watch for the truth in numbers, plus the trade ideas to capitalize on them.
Bad Intelligence
Speaking of classified information …
Germany’s Economic minister dug himself a hole last week when he said Moscow had lost access to parts crucial to its war efforts, such as “security updates for airplanes, with the result that the planes will soon be grounded.”
Fact is, Russia builds its own planes, rockets, space ships and tanks. In fact, Russia is the only superpower with a self-sufficient economy.
Now, I’m not saying it’s a rich economy, but it’s certainly self-contained.
And that leads us to a most incredible recovery in their currency, the ruble. Prior to the invasion you could exchange 80 rubles for a dollar … post invasion the ruble crumbled to 120 rubles per dollar
President Biden came out cheering that the sanctions were crushing the Russian economy, but instead Putin was prepared with a solution that rocked the world …
The Russian leader offered an incredible deal to anyone that wanted to buy Russian oil or gas:
He would exchange 5,000 rubles for one gram of gold, and the energy importer could exchange rubles for oil. It was a stroke of genius, and notice in the chart below the incredible turnaround the ruble enjoyed. Within two months the ruble was much stronger than it was prior to the invasion.
Putin is also outright accepting gold for oil, which is another genius move. In today’s world, the only commodity more important than gold is energy.
There are two crises colliding today. First, paper (fiat) currencies are being devalued due to exploding debt levels …
Second, an energy crisis that is fueling higher inflation has given Russia, which is responsible for exporting 45% of the world’s energy, massive leverage on the world’s stage.
How to Trade This Shift in Power
Energy is a national security concern because every country’s economy is built on energy. Without energy any economy will die, so here is an important fact to consider …
The US sanctions and Western ban on Russian exports have hurt the Western nations more than they have hurt Russia.
Now the West has no choice but to move forward and become energy independent. That is easier said than done and will take time and lots of government spending.
Saturday’s Power Income gave you one idea to take advantage of the sanctions. Here is another …
US Natural Gas
Post-Russian invasion Europe is in worse shape than the US.
You see, Russia has had leverage over Germany because 50% of its gas and one third of its oil are imported from Russia.
After the sanctions, the pressure has become so intense that Germany has folded and announced an “eventual” ban on all Russian imports.
The US has made promises to Germany in order for them to join the sanctions alliance. One of the promises is to ensure additional natural gas (NG) volumes for the Euro market in 2022.
The EU will work towards a goal of ensuring demand for a double of the initial volumes by 2030.
Trade Idea Southwestern Energy Co. (SWN)
SWN is an exploration and producer of natural gas, natural gas liquids and oil. The key to this company is based on its investment of $4.5 billion into Haynesville/Bossier Shales in Louisiana in 2021.
In hindsight, this investment was extremely timely as the Russian invasion and subsequent sanctions have placed SWN in a powerful position.
SWN will be a critical contributor to helping the US fulfill its promise to deliver significant amounts of natural gas and oil products to Europe in the years ahead.
SWN doesn’t just add capacity, it brings a low-emissions profile via third-party certification. This is huge and what it means is this: the product will be assessed by an independent third-party as meeting certain environmental, social and governance standards.
SWN Charting Pattern
I chose the weekly chart for SWN to show the potential for price appreciation. Notice the much higher-than-average volumes as the company expanded and the price of natural gas rose.
The low emissions profile and close proximity to export terminals put SWN in a prime position to get more AND cleaner gas to global markets.
I think this stock can double by the end of the year.
Bring It Home
The global structure post-Russian invasion is beginning to take shape. The Western nations have no choice but to attempt tightening monetary policy to bring down inflation …
However, whether successful or not, future growth will be built on energy independence via a buildout of new infrastructure and distribution channels.
In the long run inflation will remain elevated and energy demand will increase for years.
Have a great week and as always …
Live and Trade With Passion My Friend,
Griff