Energy Revelations: What the Greeks are Signaling
The Gist: A non-consensus view is that when the next slowdown occurs energy earnings won’t fall as much as we have become accustomed to for the last 25 years.
For 25 years we have become accustomed to the fact that oil & gas equities are an increasingly volatile space.
One method of illustrating this concept is by employing the Greek, Beta, or the volatility of an industry compared to the market or, in this instance, the S&P 500.
I show this in the chart below with the 3, 5, and 10-year rolling betas since 1897.
Since the late 1990s, the Crude Chronicles Energy Index (CCEI) beta has consistently increased.
We can see why in the table below.
I analyze the peak-to-trough earnings performance of the CCEI during periods when earnings declined by more than 10%.
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