Market Timing And Energy Lessons From The Golf Course
During a recent golf outing to Northern Michigan I started thinking about the similarities between playing good golf and taking a smart approach to buying energy.
What do I mean by that?
First some background on my golf game. I’ve been playing for years and I’ve settled into being a decent golfer but I’m definitely not Phil Mickelson. I tend to shoot a lot of bogies with a few pars thrown in there for good measure. Not bad. But what really kills my scoring is the one or two holes per round where I totally mess up. Those are the holes where I end up with a double or triple bogey (or worse.)
For you non-golfers, double and triple bogies are not good and they make it almost impossible to end up with a good score for the entire round.
In my case, double and triple bogies are almost always caused by making poor decision-making. I try to hit a shot that is almost physically impossible for me to make.
Sure, I could get lucky and hit a fantastic shot from under the tree and around the bend for a gentle landing on the green to tap in birdie. But in most cases I end up deeper in the woods or behind a rock in the deep rough. Which in turn leads to another bad decision as I try to make up for the previous shot.
Lesson learned: I would be much better off chipping back into the fairway and playing for a par or bogey. Scoring well at golf is about mindset and understanding the balance between risks and rewards of that next shot and it’s affect on your total score.
This lesson applies to buying energy as well.
I see many businesses wait to buy energy because the decision makers think prices are going to go down – even when current pricing is at historically low levels and would fit very well into their annual budgets.
They often think they can do a little better by waiting for a lower price. Trying to time the market can turn out a lot like my overconfident shots on the fairway. Sometimes they get lucky and they hit it perfectly. But it’s far more likely that they’ll miss out on a great buying opportunity.
We are currently in a period of historically low prices on natural gas and electricity. This is especially true for longer terms such as 24 and 36 months. My team is encouraging everyone we meet with to take a hard look at their energy position to see if there may be an opportunity to lock-in a very good rate for the long-term. There are some excellent values in the market right now.
So sure, you can wait for that next market dip in order to score that elusive energy price “birdie”. You might guess right. But for most businesses, they are much better off locking-in a very good price for the long-run that will deliver the best score for the entire round!