Category Archives: Markets

Why wars don’t move oil and defence stocks the way investors expect

Global Economy, Markets, Oil Market

Investing in oil companies as a “sure bet” when there is a temporary spike in crude is usually a challenging idea.

Why wars don’t move oil and defence stocks the way investors expect

Doing it during a war, when the destruction of demand can be much greater than the first jump in the commodity price, is even riskier. Recent history in 2008, 2018, 2022, and 2025 proves this.

Investing in oil companies must be based on fundamental analysis that is independent from the spot price of crude and natural gas and focused on value creation at mid‑cycle prices.

The key is not to jump on a short‑term wave that the oil companies themselves barely capture in their profits.

The SXEP index tracks European oil & gas companies that are highly sensitive to different businesses, expectations, investment cycles, and regulations, and in many cases, they are fundamentally refiners, not pure producers that capture the “spot” price of crude.

Continue reading Why wars don’t move oil and defence stocks the way investors expect →

Why the market can’t go up… and one positive

Energy, English, Markets, On the cover
In a letter to investors last week, Warren Buffett admitted having made some serious mistakes last October when he bought a  large stake in Conoco (purchased at $7bn worth $4bn now) and other stocks. His famous letter “buy equities, I am”, was full of confident messages about deep value and the possibilities of the American economy to recover.
All these messages were hit by harsh reality… If we distort the market dynamics through bank bail-outs, short-selling bans, rescue plans for declining industries and false messages of speedy recovery, confidence plummets further. That is what has happened.
Now for the positive. Two words: Corporate bonds.
I have seen and participated in very attractive corporate issues of three to five year bonds that yield 6% to 6.5%, with very high quality rating (single 
A) and low risk. When the bonds yield more than the equity, and the balance sheet is strong, you get 3% risk premium for free.
So far the CDS of most single A companies have stabilized, and the healthy appetite for bonds and the good quality of their balance sheets show that when the crisis is over these companies will have survived. This is not a signal to  buy their equities yet, as multiples keep expanding while EPS is downgraded, creating a fake view that the stocks are “cheap”. It’s a signal to keep investing in corporate bonds and avoid the equity market problems for a while.
Meanwhile, the VIX keeps going crazy, so if you want to be in equities, stick to the golden rule of my previous posts… 2008 outperformers with solid balance sheets will repeat their performance this year.