Demand for energy resources has been soft in recent years, due to economic problems in much of the developed world. This brought world demand growth for crude oil negative in 2008 and 2009 (see chart below). In addition, the general drive toward energy efficiency has been slow but steady, including more natural-gas power plants, efficient appliances, fuel-efficient cars, and 100% electric cars. Sluggish demand was interrupted by a spike in demand from emerging markets (in particular, China) in 2010, but that reversed in 2011-12 as China slowed down.

The world supply capacity growth, however, has been below demand growth in 2010-11, making for a tight market and contributing to elevated prices.

Sources: IEA, Model Capital Management LLC

Two pieces of information just surfaced recently that, in our view, are critical pieces of the puzzle for future crude oil prices and other energy resources.

North American Supply Shock

The

Actionable Items:

• Highest Positive Spread: Japan Smaller Capitalization Funds (JOF)
• Focus Stock: Aberdeen Indonesia Fund (IF)
• Last Week's Focus Stock: Mexico Fund (MXF)

Equities or Bonds: Sales have come in below forecasts for the 1Q. While analysts had expected 0.5% growth, the rate is 0.2%. Among companies that have reported, 48% beat Wall Street's projections for sales, below the average of 52% from the past four years.

Economists' predict that the second quarter growth rates will not grow at rates beyond 2.5% in the first quarter. The European quagmire has taken its toll, the Sequester and healthcare premiums will have their effects on growth.

However, the Thomson-Reuters/University of Michigan "early-May" consumers' sentiment index jumped to 83.7 in May from 76.4 at the end of May-the highest in since 2007.

P/E Ratios: The 2013 P/E ratio is 14.9 times S&P 500 earnings (bottom/up). The average median is 14.9

In the introduction to the last Bull Bear Market Report, I further developed the thesis that an impulsive equities bull market began in November 2012:

Most analysts continue to make the mistake of believing that a secular bull market started in March of 2009. The actual situation of this market very closely parallels the 1974-1982 time frame. While the price bottom was made in 1974, the actual secular bull did not begin until the 1982 low. Our contemporary 2009 bottom and November 2012 low are playing the same role and function. While a great many market participants believe that this bull is "long in the tooth" and fret that the market is at or near the prior all time highs, a correct understanding of the actual context of the current market setup shows that instead we are yet in the early stages of a secular bull. It's also important