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How to make money off the U.S. energy revolution

Daily Ticker

There's a revolution going on in the U.S. energy industry and it's transforming the economy and creating opportunities for investors. So says David Kotok, chairman and chief investment officer of Cumberland Advisors, who founded the firm around the time of the first Mideast oil embargo in 1973 which quadrupled the price of crude oil from $3 to $12 a barrel.

Now the U.S. is producing more oil and natural gas than Russia and is poised to become the world's top oil producer by 2016, according to the International Energy Agency.

Related: Drill, Baby, Drill: U.S. Energy Revolution Being Heard ‘Round the World, Yergin Says

"We have this huge abundance of energy," Kotok tells The Daily Ticker in the video above. "It creates, new jobs, new investments...and it will go on and on and get bigger and bigger for a lot of years. This is a terrific thing for business, for investors, for the country."

And it changes the ways investors should view the energy sector.

"The whole notion for half a century has been scarcity, rising price," says Kotok. "Now we have a new paradigm...abundance, level price, [and] maybe falling price, and in inflation-adjusted terms, certainly falling prices, and this will continue for about 20 to 40 years."

Related: Al Gore: “Carbon Bubble” Is Going to Burst – Avoid Oil Stocks

Kotok suggests investors take advantage of this new scenario by investing in the beneficiaries of falling energy prices and abundance of supplies rather than in the actual commodity. He favors the iShares Transportation ETF (IYT), Materials Sector SPDR (XLB) and Industrial Select SPDR (XLI). Kotok owns the IYT ETF and the XLB and XLI ETFs in managed accounts.

"You have railroads carrying oil on tanker cars, the chemical industry [benefiting from cheaper] inputs...The whole idea is to think about this in a different notion."

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