THE TRUTH IS THE TRUTH, AND THE SPIN IS JUST SPIN
Investors who learn the truth and ignore or avoid the spin make the money. Those who don’t get to the truth or who listen to and believe the spin are going to have a hard time.
Our job is to separate the truth from the spin.
To do this you need to:
A. Be thorough, and willing to research issues deeply.
B. Be willing to ignore most of what you hear in the popular media and from the political and financial establishment in every country.
C. Have the economic and financial education to know when something is not logical or rational.
D. Have the patience to wait for the public at large to understand what you already know.
A. Years ago we pointed out that the war in Iraq would be time consuming and very expensive. We pointed out the history of the region, and the many unsuccessful wars there in the last few centuries. A prime example is the hard lesson Britain learned.
B. Years ago, when others were saying gold could not surpass $300 or $400 we were saying BUY. Today it is above $600 per oz.
C. Three years ago when people were saying oil was going back down to $20 or below we said it was GOING TO $100 BY 2008. Oil currently trades at about $70 per barrel.
D. Not too long ago people were saying the economy of the world will implode if oil goes to $40 per barrel, we said NONSENSE. Oil is currently $70 per barrel, and there has been no implosion or major decrease in demand.
MAY I POINT OUT WHY GLOBAL “AUTHORITIES” ARE ALMOST ALWAYS WRONG WHEN THEY MAKE PREDICTIONS ABOUT COMMODITY PRICES? IT IS SIMPLE: THEY HAVE A HIDDEN AGENDA.
It was Saudi Arabia and a couple of big oil companies who kept saying that oil was going back to $ 20 per barrel. May I translate for you the real meaning? Saudi Arabia was saying to the consumers, “We do not want you to think that the price could stay high for long, because we do not want you to begin to develop alternative fuels if you are a consumer of our energy.”
In my opinion, the big oil companies were saying, “…if you are a country who we contract with to drill up your resources and resell them, we do not want you to think that your assets are worth a lot, and then charge us a high price to drill and produce them.”
So both groups where repeatedly stating that oil prices would come down. The absurd thing is that most listeners believed them.
Most people are sheep and follow the crowd. In fact, a recent study said 80% of professional investors are not suited for the pressures of the job. While the public is 98% unsuited to be a good investor. To succeed as an investor, you must be optimistic, but also willing to swim against the tide and repeatedly risk the scorn of your peers. The best investors often do things that conformist investors think are unwise. To have the best record, when others zig you have to know when to agree with them and zig, and when to zag.
A good money manager must depend upon the facts and totally ignore what others are doing. While intelligence, education, knowledge and a strong will all help; recognizing opportunities and understanding the commensurate risks works best in the long run.
The successful investor uses logic and information to act, not greed, fear, desire to conform, and a need for job security (an investor must often bet his or her future). An investor only uses facts and logic.
WHAT ARE WE SAYING NOW?
These are the outcomes we foresee and not the outcomes we wish for. So let us be practical and make money on the outcomes we foresee.
1. The world economy will continue to grow. China, India and Russia will become more important. U.S. political and economic power in the world will diminish. It will be a multi-polar world, with poles in the U.S., China and others (perhaps India or Russia).
2. Russia will become the worlds biggest oil producer, as Saudi production continues to fall. We have been predicting this fall in Saudi production for many years. (Matthew Simmons has written a good book on this very subject called Twilight in the Desert).
3. The U.S. dollar will continue to fall as a result of the drop in U.S. political and economic power and this will cause a rise in the price of foreign currencies and gold. Gold will go above $1,000 per ounce in the not too distant future.
4. Oil prices will stay high and could spike above $100 if a crisis occurs. Demand will remain strong. Gradually oil supply and demand will loosen as Russia increases production and alternative energy projects will finally begin to gain traction.
5. An energy crisis could be precipitated by problems in one or more of several locations: including the Mid-East, Nigeria, Venezuela, Russia, or Mexico. Pick your poison.