This column originally appeared at 10:07 a.m. ET on Real Money, our premium site for active traders. To get great columns from Jim Cramer and other Real Money columnists earlier in the trading day, click here.
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Oh, I wish I were an expert on healthcare stocks instead of oil and gas -- that'd make the forecasting of what will happen under a new Trump administration so much easier. With Obamacare's repeal of the most likely of several of President-elect Trump's "proposals" to come to pass, we've seen and will continue to see a whopping rally in the healthcare sector and insurance. With the energy space, predicting what will be affected and how soon is proving to be much more difficult to parse.
But try we must. Mr. Trump's energy policy, when any of it was even marginally spelled out, did not amount to much -- although he did vow to help the coal miners he campaigned in front of in West Virginia. But other clues about how Trump will deal with the economy and regulation might give us a better clue of where to look for value.
First, with coal. It has been true that the Obama administration, with its strict EPA mandates on utility emissions, has accelerated the decline of coal use here in the U.S. The election of Trump certainly assumes that those EPA restrictions will be rolled back. Stocks like Arch Coal (ARCH) , Peabody (BTUUQ) and Alliance Resource Partners (ARLP) had their best few days in years, all climbing in double digits. Still, the path of lowering carbon emissions has now been ingrained in the utility industry in long-term production goals that they are unlikely to alter much, even if the EPA removes all of their targets for the next decade.
Clean coal and the sequestering of CO2 is also pretty much agreed to be a fiction and inefficient, which has driven the environmental questions as well as the economic questions on coal, particularly while oil and gas prices have been so low. So, while we can look for the life expectancy of U.S. coal producers to be extended under Trump, besides a local rally in the shares, we cannot look for a long-term resurgence in coal as a major energy source here. No matter who is President, coal is the fuel of the past -- no one can change that. I won't deny that it's been a great trade recently, though.
On the flip side, solar stocks have gotten murdered, even in a raging stock rally. We can imagine the end of all subsidies on alternative energy from a Trump administration, and without those, much R+D and a lot of planned installations of solar production will be halted. As positively as coal stocks have reacted, solar stocks have gone just as sharply in the other direction, with First Solar (FSLR) , for example, losing 20% of its value in the last two days.
On other U.S. energy, we need to take our cues from other statements from the Trump campaign trail. He has spoken about an end to most regulations on fracking and opening up Federal lands to drilling. Of course, the low energy prices and reduced production that the U.S. is currently experiencing are due to overproduction, so reduced regulation won't make much of an immediate difference.
He's given the green light to the Keystone pipeline, but again, with low prices, it's not likely to be built now, even with a U.S. go-ahead, especially with Trump's professed hate of NAFTA. He's expressed distain for the Paris environmental accords, but unless Trump destroys the EPA, he must wait three years to formally withdraw.
Probably most importantly, he's expressed his dislike of the nuclear deal with Iran, a pact he'd certainly have the support of a GOP Congress in discarding. However, while this might have a paper effect in proving Trump's "toughness", it is unlikely to have any real effect: International sanctions that gave the U.S. so much leverage in the deal are now almost impossible to restore and no other European who signed the treaty is likely to follow Trump - witness the latest big Total (TOT) gas deal with the Iranians worth over $2.0 billion as proof. It will incrementally add pressure on Iran, might make the Saudis a bit happier, but won't do much to curb the growth of Iranian oil.
On balance, we have a mixed bag of signals with the incoming President. One high point for commodities in general would be the infrastructure package Mr. Trump signaled during his acceptance speech. But infrastructure spending has been the least favorite idea of a GOP-controlled Congress, especially if it were combined with the promised Trump top down tax cut, swelling US deficits grossly.
We'll have to wait and see.
I am still parsing out the likely from the possible, and while I'm doing that, won't be making many moves to my portfolio, save for a few trades in the most volatile solar and coal sectors. As for our beloved oil and gas players, I say the time is ripe to do nothing -- yet.