Don't Ignore the Current Boom

04/04/2013 8:30 am EST

Focus: MARKETS

Jim Jubak

Founder and Editor, JubakPicks.com

While many are fixated on the ECB, the Bank of Japan, currency rates, and so on, MoneyShow's Jim Jubak recommends that you focus on the current boom taking place closer to home.

These days, we're not paying much (if any) attention to anything in the financial markets besides Central Banks and related, big macro financial pictures.

So we're looking at currencies, where the Bank of Japan is going to force down the yen. We're looking at what the European Central Bank is going to do in its fight with the IMF. We're looking at Bundesbank policy. We're looking at, well, bond rates...all those things. They've taken all of our attention-and rightfully so-away from the real economy.

But you need to put a little bit of thought into the real economy, because there are some amazing things going on, particularly in the US energy sector. What we're seeing is a boom that, instead of tapering off, seems to be getting boomier.

This has big implications for the US economy-the US economy is likely to be stronger because of lower energy prices-and it has big implications for the global economy. It means that globally energy prices are likely to be lower than we thought they would be, so that's not going to be a tax on growth.

It really means also that if you're looking at stock markets, the US and Mexico-which is right next door and shares some of the boom areas with the United States-look like places that you'd like to be putting money into, because of what's going on in the real economy.

We've got a number of things going on. You know about the big sort of mid-continent oil boom in the United States, going on in the Dakotas down through Texas. You know about the big natural gas boom. You may not have followed it, but there have been big announcements recently of new discoveries in the deeper waters of the Gulf of Mexico, which is something that Mexico shares. You've got all this going on in the United States, which was thought to be kind of played out in the energy zone.

So what you're looking at here is really lower prices, and the question of where these prices go. I would be looking at a company like Cheniere (LNG), which has the only license for building a plant to export liquefied natural gas from the United States-a big edge because a lot of the companies that consume gas in the United States are going to fight this politically. They don't want to see exports drive up the prices at home. So look at Cheniere, as simple as LNG.

In the Gulf of Mexico, you might look at some of the companies that have found deepwater deposits. These are probably two, three, four, or five years away from actually producing a whole lot of oil, but it's clear that this is an immense field. It's called the Lower Tertiary trend; it stretches over a long distance of the Gulf of Mexico waters, about a mile deep.

The oil itself is under six miles of rock, so it's expensive to drill...but still, amazing discoveries by Anadarko (APC), ConocoPhillips (COP). And...since these wells are so expensive to drill, I would look at companies that do seismic imaging, such as Schlumberger (SLB).

Then I'd look at companies that provide the drill ships, so Transocean (RIG) or Seadrill (SDRL) in the United States. And then some of the companies that provide pipes and pumps, National Oilwell Varco (NOV) one that comes to mind immediately.

So there's a big energy boom going on, and it's something to pay attention to, even as we follow currencies and Central Bank Policy.

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