Oil's been in a bear market for more than a year – we've known that. But now the stock market is entering its own bear market, which changes everything about the way we now need to watch and trade energy stocks. It's going to make for a very tough year for me.
I am a lousy bear market trader. That only makes sense, considering I made my money trading oil on the floor from 1983-2007. Except for a relatively brief three year period in the late 80's-early 90's (when I struggled quite a bit), oil was in a one-sided bull market, traveling from the high teens to over $140 in 2007 as I pulled up stakes and left full-time oil trading - right before the big collapse.
During the few bear market corrections in oil during my time on the floor I would sell, but only for very short periods, remaining uncomfortable on the short side and dreaming of the bull market to come, when I would really score.
This 'style' carries over to my oil stock positions today, where I have for the past year looked for value moments to buy quality oil stocks – and watched them painfully go a lot lower. I made a mistake in thinking that the market would only punish overleveraged marginal producers with less than stellar acreage, leaving the good ones alone: I pointed out more than a dozen 'walking dead' U.S. producers as early as December 2014, and reiterated the call in March of 2015, warning investors to keep their powder dry and wait for value on what I called 'the survivors'.