| Are the bulls stampeding toward the cliff's edge? Stocks appear to be recovering, but with the global economy mired in a deep recession and the coronavirus far from vanquished, many investors are wondering if the rally is too good to be true. For answers, I interviewed my colleague Nathan Slaughter, chief investment strategist of The Daily Paycheck and High-Yield Investing. Nathan is an expert in pinpointing investment opportunities in corporate takeovers. His previous experience includes a long tenure at AXA/Equitable Advisors, one of the world's largest financial planning firms. After attaining NASD Series 6, 7, 63 & 65 certifications, Nathan [pictured] moved to Morgan Keegan, where he managed millions in portfolio assets and performed consultative retirement planning services.  Nathan holds a degree in Finance and Investment Management from the Sam M. Walton School of Business. This week, I sat down with Nathan and asked him for insights into these extraordinary times.
The stock market has partially bounced back from its March lows. In fact, the S&P 500 is on track for its best month since 1974. Can stocks maintain momentum, or should investors remain wary of rallies until the coronavirus pandemic is vanquished? We haven't seen the last "head-fake." That's when stock prices make a move in one direction, but then reverse course and move in the opposite direction, like a boxer trying to fake out his opponent. The COVID-19 pandemic has inflicted serious pain on the global economy. But I believe the wounds are superficial and will heal. In my opinion, the selloff was overdone. The major averages tumbled 40% in just 28 trading sessions. The speed and severity of that epic collapse are unparalleled in the annals of market history. But I would argue this bounce-back rally has also gone too far, too fast. Granted, the market is a forward-looking mechanism and the $2 trillion stimulus package will provide a major economic jolt. What's more, several states are taking baby steps to re-opening. Read This Story: Stock Market Rebound or…Bear Trap? Still, it's hard to justify this level of optimism, at least until we get a better read on second quarter earnings. That being said, if you wait until the "all-clear" signal has been given, the most attractive discounts in the market today will be long gone. Can equilibrium be restored to the turbulent energy market over the near term, or will crude oil prices stay depressed into the foreseeable future? Having spent many years as the editor of a commodities newsletter, I can tell you that crude oil movements are notoriously hard to forecast. I leave raw price speculation to others and prefer to look for competitively advantaged businesses that can churn out positive cash flows in both up and down cycles. Of course, we've never seen a slump quite like this before. Much has been made of the fact that an oil futures contract recently dipped into negative territory for the first time ever. There is a big difference between low prices and having to literally pay somebody to take physical delivery of your oil. It's an upside-down situation for sellers to pay buyers. But without refineries, unprocessed crude oil is utterly worthless. June contracts for benchmark West Texas Intermediate (WTI) have already tumbled to around $12 a barrel and could slide into negative territory again. OPEC has pledged to curb production by 10 million barrels per day, and Permian Shale producers are turning down the spigot as well. But there is still too much excess supply sloshing around. With drastically fewer cars on the road and planes in the sky, crude consumption has diminished by approximately 30 million barrels per day. Read This Story: OPEC's Oil Cut: Big Deal or Big Dud? With that imbalance, storage tanks are nearing maximum capacity. Stockpiles at the nation's main hub in Cushing, Oklahoma have reached 60 million barrels and could fill to the brim in weeks. I don't see a meaningful near-term recovery. Many weaker players won't survive this storm. That starts upstream. But as the dominoes fall, it could topple offshore drillers, equipment vendors, and even some pipeline owners. Here's the good news. Many large producers have learned their lesson from previous crashes. Disciplined outfits such as ConocoPhilips (NYSE: COP) have worked diligently to shore up their balance sheets, lower breakeven costs and live within their means. They have ample liquidity and can defer capital spending for a while, hunkering down until oil demand picks back up. | 
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