(WCTW) Follow The Process
It's easy to let results dictate your actions, but in the end, process is the only thing that matters.
Process, everything is fundamentally about the process. That's how I approach investing and life. Results are what they are, luck is what it is, but at the end of the day, the only thing you can fundamentally change is the process. The process of investing, the process of how you approach life, the process of your mental thinking, it's ultimately the process that drives everything you do.
And when it comes to the oil market, I think we've built a process that is repeatable and easily understandable. For 2024, our key focus is that refining margins will lead the way for crude. When flat crude prices hit a certain level and refining margins fail to rally in tandem, it signals to us a peak is here for the near term.
In this case, the process, or the key indicator, is waving red flags at us. Not only is the 3-2-1 crack spread starting to turn lower, but Asian topping margins are going negative.
Source: Barchart.com
This in combination with the fact that I'm seeing some of the most overbought conditions in history led to the decision to sell out of Suncor and Cenovus Energy.
Cenovus
A deeper self-reflection...
I look back at the years I've been in the energy investing world and I can't count how many mistakes I made. Every time oil and energy stocks rallied, I started to believe that the supercycle is here, the supercycle is here only to get the rug pulled right under me. So yes, I am paranoid, but there is a deeper sense of self-realization here. The reality was that I didn't do a better job of analyzing the market or a better job of analyzing the stocks in the sector.
I look back on the process we had over the previous years and I can't help but think the results are what they are because the process just wasn't good enough. So it's with this sense of deep self-realization that I've embarked on a more disciplined approach to markets. I think this deeper self-realization, that the process is inadequate, is what motivated me to want to expand into energy stock analysis. It's what motivated me to build out the oil market indicator signals, and it's what's motivating me to tell you that the near-term outlook is cautious at best.
I want to commit to doing a better job in following and improving the process. That's the only way we can consistently make money in this market.