NEW YORK (TheStreet) -- This is a unique moment for oil and the oil trade. In the last several days, oil has been the one and only asset class that retains its value while virtually all other paper assets have been shedding it.
Now is the time to readjust portfolios towards energy to remain safe in the more turbulent bond and stock markets we are now facing.
Once, gold was the obvious choice for diversifying assets and keeping one's portfolio safe from volatility and deep stock downdrafts. But gold has been a terrible investment in 2013, showing weakness beyond even the paper assets it is meant to hedge us from.
Now trading closer to $1,275 an ounce, a level not seen in three years, the gold trade looks tired and losing the interest of money managers and retail investors alike.
And oil is quickly taking its place.
There are two reasons for this. One is the tremendous financialization of oil that allows hedge funds, wealth managers and retail investors access to price exposure through futures, ETFs and managed funds as well as GSCI index-based funds.
That level of access in a hard asset is not comparable anywhere -- except with gold. When the gold trade begins to grow long in the tooth, managed funds have only one other hard asset which will accept fast and large capital investment flows -- oil.
We see the massive money flowing in the oil trade: the latest "Commitment sof Traders" reports from the Comodity Futures Trading Commission shows speculative long positions in crude oil at a three-year high.
Second, oil is a staple commodity that can be instantly monetized. No matter the state of the global economy, oil will continue to be critical for heating homes, running cars and powering businesses. You can burn oil and make energy. Try that with a bar of gold.
Investing in a staple commodity requires buying "staple-like" oil companies, specifically exploration and production companies that can monetize what is a sticky and high price for oil.
Those companies that are more bond-like and generating yield (like an
) are going to be more vulnerable to interest rate risk, while the higher beta names (like
) are going to perform better over time.
I talk more about oil as a lone remaining storehouse for value with Joe Deaux in the video above.
At the time of publication the author had positions in APC and NBL.
This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Dan Dicker has been a floor trader at the New York Mercantile Exchange with more than 25 years of oil trading experience. He is a licensed commodities trade adviser.
Dan is currently President of
a wealth management firm and is the author of
published in March of 2011 by John Wiley and Sons.
Dan Dicker has appeared as an energy analyst since 2002 with all the major financial news networks. He has lent his expertise in hundreds of live radio and television broadcasts on
US and UK and
Dan obtained a bachelor of arts degree from the State University of New York at Stony Brook in 1982.