THE 1% IS CAUTIOUSLY INVESTING IN ENERGY: TIGER 21 CHAIRMAN
February 10, 2016
When it comes to investing advice, there’s no shortage of talking heads, advisory services, industry newsletters and the like. But sometimes the best information is passed on the old fashioned way-from person to person.
TIGER 21 is a peer-to-peer learning network for very high-net-worth investors to meet with a network of nearly 400 entrepreneurs who have experience selling businesses. They get together periodically to discuss their personal experiences in their respective industries and to share ideas with well-networked professionals.
Where the 1% meet
Last week, TIGER 21 conducted a meeting in Los Angeles and Beverly Hills. Of the investing sentiment among the nearly 600 attendees, Sonnenfeldt said, “There was no bullish sentiment. That’s for sure ‚Ä¶ but the mood was somewhat neutral, I would say.”
According to Michael Sonnenfeldt, chairman of TIGER 21, “We’re first-generation creators of wealth. We’re not catering to people who’ve inherited, so everybody comes with the ability to communicate how they’ve made their wealth ‚Ä¶ And our members range in investable assets from $10 million to about $1 billion.”
The meetings are a learning experience that “center on improving the members’ investment acumen through peer-to-peer critique and learning, as well as exploring common issues of wealth preservation, estate planning, and family dynamics.”
The Federal Reserve and interest rates
Wednesday and Thursday, Federal Reserve Chair Janet Yellen testified before Congress, and the subject of interest rates was front and center. Sonnenfeldt confirmed it was also a central topic of discussion at his forum.
Regarding the participants’ projections, he says, “The Fed is not going to be able to raise rates. The bet was that interest rates will stay where they are. And the Fed will have a hard time raising interest rates.”
Crude oil and credit contagion
But it was fears about a credit crisis due to ultra-low oil prices that produced the most concern. “Some of these [energy] companies are going to go bankrupt, and that may have a negative effect on the credit market-absolutely-for sure,” says Sonnenfeldt.
“You know they’re talking about the junk-bond market cracking. There’s already been about $20 billion of bankruptcies in the oil patch. The predictions were between $50 billion and $100 billion before year end, and we’re not at the bottom,” says Sonnenfeldt.
Some featured speakers at the conference believe a low point in crude oil will be reached by year end. “Whether that’s $25 or $20 [per barrel], I don’t think anybody knows.” Today, crude oil dipped to just over $26 per barrel.
Where the opportunities are
The bottom line, though, according to Sonnenfeldt, “is that there will be extraordinary opportunities-if you have the fortitude-in the oil and gas area.” He cites the oil and gas master limited partnership sector as one that has been hit traumatically, but he is seeing members wade into it cautiously.
Source: Yahoo Finance, TradeStation
Sonnenfeldt calls this a stock picker’s market-particularly in oil and gas. He cites field services companies like Schlumberger and Halliburton as prime examples. “They are part of a group that’s been devastated by the slowdown in oil and are typically ones that pick up after the bankruptcies flow through,” says Sonnenfeldt.