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In Light of Peak Oil, Financial Diversification Is a Bad Idea

by: Michael Fitzsimmons May 30, 2008 | about stocks: APC / CHK / COP / CVX / DBC / GLD / NBR / SLB / STO / XOM    

Michael Fitzsimmons

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The realities of peak oil and the disastrous US monetary policy of the last 8 years have completely changed the rules of investing. Pick up any financial publication - be it Money magazine, investment publications from Vanguard, or articles by the lead economists at firms like Schwab and Fidelity and you will still see a common theme: advice from money managers to have a well diversified portfolio. I am here to tell you that this is good advice for them, but terrible advice for you. Here's why.

Most investment advisors these days continue to promote a nice pie chart which is broken down into easily understandable slices. Typically, these slices include US stocks, international stocks, bonds, and cash. Some investment advisors have added commodities to the pie. Along with the slices, the advisors provide us with percentages, usually indexed to the investors age. Common advice might be something like: 40% US equities, 20% international equities, 20% bonds, 10% commodities and 10% cash. This is simply an example, but you get the idea.

Why do I believe this to be a bad idea? For US investors, the realities of peak oil mean the following: energy prices will continue on an upward climb and therefore inflation will follow. The massive devaluation of the US dollar since Bush took office (>50%) will simply exacerbate the problem since oil is traded the world over in US dollars (at least for now!). As readers are aware, I have often commented that the US dollar has been replaced as the world's "reserve currency" by a barrel of oil. Regardless, what do the realities of peak oil mean for the diversified investor?

Let's take a look at the pie. For the 40% of US equities (remember, these percentages are simply examples), if we assume this to be invested in the S&P500, only 15% of that will be in energy since that is the approximate energy weighting today (energy recently leap-frogged financials in this respect, which is a big red flag in itself for those paying attention). So, 15% of 40% and the investor will have roughly 6% of his money in energy. Hmmm...that's not very good. Considering the last 10 years the S&P500 has returned around 3.5%, now wonder people are complaining about their portfolios balances! Meanwhile, in that same period, many energy investments have been up 25-30% per year.

International equities is a bit of a different, and better, story. The falling US dollar has been a boon for foreign investments. Those investors which have been astute at foreign market picks have really done well. That said, in the future investors would be well advised to keep their foreign investments in countries that produce oil: Brazil and Russia come to my mind.

Most US bonds and fixed income in general is dead money. With low US interest rates (2.5%), high inflation (over 5%, don't believe the government data, which everyone knows is fudged), and a US currency that has been dropping 6-7% per year, most US fixed income investments are simply a way to fall behind in terms of capital preservation, let alone capital appreciation.

Commodities is a good bet. If the investment pie has a 10% slice in commodities, shake your advisor's hand. Oil, natural gas, gold, silver, wheat, cotton and soy beans are all good. These investments are real, or hard, assets and will surely help the US investors keep pace with inflation and a devalued currency.

"Cash" is a bad idea unless you place it in US dollar hedges like the Merk Hard Currency Fund [MERKX] or the Prudent Global Income Fund [PSAFX]. Cash simply won't keep up with inflation and the falling currency.

So, of the investment pie the professionals advise, only 21% are in assets that protect the investor from the realities of peak oil and a devalued currency: the 6% in energy and the 10% in commodities. Over the past 10 years, this formula would have been a losing proposition once inflation and the falling value of the dollar are taken into account.

What's an investor to do? First of all, forget diversification - it is a way to the poor house in the years ahead. Forget the S&P500 and US bonds. Concentrate your money in energy, precious metals, and commodities. Period.

Here are some great choices to outperform the market in the coming years (in no particular order):

  • ConocoPhillips (COP)
  • Exxon Mobil (XOM)
  • Chevron (CVX)
  • StatOil (STO)
  • Schlumberger (SLB)
  • Nabors Industries (NBR)
  • Chesapeake Energy (CHK)
  • Anadarko Petroleum (APC)
  • GLD (Gold ETF)
  • DBC (Commodities ETF)
  • Vanguard Energy [VGENX]
  • Vanguard Precious Metals [VGPMX]
  • Fidelity Select Energy Services [FSESX]
  • Fidelity Select Natural Gas [FSNGX]
  • Merk Hard Currency Fund [MERKX]
  • Prudent Global Income Fund [PSAFX]

Buy these stocks, funds, and ETFs and just hold them. Don't let day-to-day headlines or huge energy volatility scare you out of these positions and you will do fine over time. As an aside, the oil inventory report just came out today, and oil inventories were down over 8 million barrels, a big big surprise versus estimates. Anyone remember Gomer Pyle - "Surprise, surprise, surprise!" Still, there is no comprehensive US energy policy out of Washington, DC.

Dow Chemical yesterday specifically pointed to the lack of a comprehensive US energy policy as a big reason for having to raise its prices. This is a scenario the investor should get used to, and be prepared for in the years ahead.

Meantime, if you'd like to send your Congressman/woman or Senator a real comprehensive energy policy, please send them this link.

It will definitely be the most patriotic action you take this day. Thank you!

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This article has 84 comments:

  •  
    May 30 08:53 AM
    The author apologizes: 21% above should be 16%: 6% energy + 10% commodities.
    Reply
  •  
    May 30 09:21 AM
    I agree with you and make a similar argument for young people's future retirements:

    20smoney.com/2008/05/0.../
    Reply
  •  
    May 30 09:25 AM
    Interesting and quantitative reasoning for what I think I've found myself intuitively (luckily?) gravitating to over the past few years. So much of my portfolio has trended to energy (NatGas, Oil & TarSands, CanRoyTrusts, and even Solar & Coal) that I've been concerned that I was not "diversified"... enough. Here's an article that reasures me that I'm not crazy. [my picks might not be perfect, but there were/are reason to be energy/commodity heavy]
    Reply
  •  
    May 30 09:28 AM
    Nothing in this paper makes any sense. Its nothing but a politcal rant.
    Reply
  •  
    May 30 09:39 AM
    That would be political not politcal. That make you wrong twice.
    Reply
  •  
    May 30 09:44 AM
    Six figure portfolio...90% invested in two energy-related companies(one Canroy, one GOM offshore driller)...up 40% since January. I believe you are on the right track.
    Reply
  •  
    May 30 09:45 AM
    Global production was 85.9 million bpd in February of 2008. Peak oil?
    Reply
  •  
    May 30 09:49 AM
    P.S. Petrobras struck more light oil in shallow waters yesterday: www.reuters.com/articl...

    That makes that about their 10 billionth oil discovery this year. Peak oil?
    Reply
  •  
    May 30 10:04 AM
    'Are You Diversified?' is a fools game, in this current investment enviornment, as Fitz correctly points out (IMHO). I have laughed at Cramer each night, as he plays this little game, and can say without reservation that those who have followed his diversification game, have not done nearly as well for the past 3 years, as my non-diversified grouping of energy stocks and funds. The question now, however, is 'what happens next'........and the answer to that is not nearly so clear. If the last energy crisis is any guide, energy stocks continued to go up, after everything else turned down, with oil stocks up 60%+ in 1980 alone. Kurt Wulff (superb Oil Analyst, IMHO, mcdep.com), sees some similarities between our current situation and 1980 (election year, energy shortage recognized, high energy prices affecting the economy, etc.), and is still very bullish on oil and energy stocks. I follow Kurt closely, and continue to follow his advice. I recommend him highly. He posts here from time to time, but his advice is free on a time delayed basis at mcdep.com.
    Reply
  •  
    May 30 10:15 AM
    What peak oil?

    Consider Saudi Arabia is producing well below their maximum achieved rate of 10.5 Million BPD. Iraq is well under their maximum of nearly 4 mbpd.

    OPEC in general is below 30 mbpd, down from a peak of nearly 35 mbpd.

    Venezuela, Mexico, Norway, England, and Nigeria are all below their maximum production levels.

    Iran indicates that they will produce less in the future. Perhaps, Mahmoud and co. know that they have reached a peak, and rather than just admit it and let it drop, they are going to politicize the future reduced output and keep the world thinking that they have more than they do.

    Russia recently reported a 1% year on year drop in production. While it may be too early to call that a peak, as the drop is very small, it doesn't bode well.

    It is also interesting to note that the US has also hit a peak (a few decades ago). But, we all know that if we just let the oil companies drill a little more that would not have occurred.

    Each of these countries has peaked for different reasons; revolution (Nigeria, Iraq), incompetence (Russia, Mexico), environmental wackos (US), just plain wackos (Venezuela), economic choice (Saudi Arabia and Iran) or admittedly running out of oil (England and Norway). The bottom line is it sure is beginning to look a lot like Hubberts peak oil scenario.
    Reply
  •  
    May 30 10:16 AM
    For those peak oil non-believers (yes, there still are some), I refer you to yesterday's (5/29/08) article on page A8 of the WSJ (yes, even the Wall Street Journal is coming around! fantastic) titled:
    "Oil Exporters Are Unable to Keep Up With Demand"
    In particular, check out the production numbers of many countries are going DOWN as the oil price has skyrocketed. We'll see $200/barrel oil by 2010.
    Reply
  •  
    May 30 10:39 AM
    We'll see $200 oil because the dollar is on it's way to zero.

    According to the American Geological Institute the high commodity price of oil is half explained by the weak dollar i.e. political and not geological factors: seekingalpha.com/artic...
    Reply
  •  
    May 30 10:39 AM
    Brian Pursley - "Global production was 85.9 million bpd in February of 2008. Peak oil?"
    woohoo, that beats the 2005 peak of 85.5mbpd. Glad to see that a 100% increase in oil prices has brought on additional 0.5% more oil into the market. I suggest you familiarize yourself with the production rates of some old friends of yours such as Cantrell and the North Sea.

    There will always be oil on this planet. Its just that you won't always be able to pay for it
    Reply
  •  
    May 30 10:42 AM
    Hey Fitzman, another great article. Any chance of you becoming the Secretary of Energy under the next administration?
    Reply
  •  
    May 30 10:54 AM
    Just as with most other geological based resources, the oil easy to find and cheap to produce is behind us, and the difficult and expensive lies ahead. Present oil use is nearly 15M tons/day. 5B tons/year. Similiar trends exist with respect to met coal. The trends are clear, and have been clear for decades. The realities for earths geology is not much changing anymore.

    For investors, an important near term consideration may be the risk to USA based oil company ownership, given the rabid anti-big-oil sentiment of the citizenry and the naivety of the politicians with respect to facts.
    Reply
  •  
    May 30 10:57 AM
    Okay, Brazil discovers oil. When is it coming onstream? Tomorrow? Ten years from now? Twenty? These are very deep and hard to pump finds. And deepwater oil rigs are in short supply--though Brazil has most of them.

    Who has audited the Saudi fields? You take their word? An oil expert from Iran has sounded the peak oil bell--I can't tell you his name because I'm a slouch, but I've read his commentaries.

    How about microcaps for the adventurous? How about uranium?

    How about gold and silver?
    Reply
  •  
    May 30 11:21 AM
    Not a bad column. I think to blame Bush for the dollar's decline is a bit unfair. The Democrats want an even weaker one. The massive US trade deficits and ridiculously low interest rates have led to the weak dollar.

    Peak oil is a reality. However, I question putting huge amounts of money into the oil majors. These are dinosaurs who can't possibility replace their reserves. An oil company without reserves is dead. The stocks will be dead (lag the price of oil) for a long time to come. It seems the only group that wants to own for Exxon stock is Exxon!
    Reply
  •  
    May 30 11:26 AM
    My brain says you're right.

    But, as a Californian, my gut says that it's Enron revisited... & the world is being gamed... at least by 50%. My portfolio has not been very diversified in a long time. I've tended to energy, mining, food, infrastructure. Those are things that I can get my mind around.

    However, I'm beginning to have those butterflies in my stomach that I tend to regret when my brain says put them on ignore. Those butterflies are warning that we'll see another energy crash like in the early 1990s.

    It benefits all of these oil producing countries from Iran to Venezula to Nigeria to Saudi Arabia to slow the tap & skew their figures to the worst case scenario. But, it's a tight rope that they walk. They'll open the taps, oil will flow, & we'll revert to same ol' same ol'... but at a somewhat higher price.

    The real question is how many times will we go thru this scenario with peak oil?
    Reply
  •  
    May 30 11:54 AM
    Hey fool, it is BOTH the dems and the republicans who got us into this mess. What are you biased?
    Reply
  •  
    May 30 11:57 AM
    FoxV: And I suggest you familiarize yourself with Petrobras which is growing it's reserves at 6% annually. Allow me to introduce you to some new friends of mine named Barracuda, Caratingua, Tupi, Jupiter, and Carioca.
    Reply
  •  
    May 30 12:14 PM
    CLH: Your constructive comments are appreciated - thanks for taking the time to write something substantial - and good luck in the S&P500.

    Ozarker: that cracked me up.

    cynical: ur on the right track...it's not being cynical when the facts line up.

    pursley: i won't debate you any more - we agreed after my last paper to simply check back in 5 years to see who was right. that said, the dollar is down about 50% since bush took office, yet oil is up over 6x - it ain't all about the dollar...it is supply/demand. not sure why supply/demand works for all other commodities but not oil. part of the denial process i suppose.

    FoxV: excellent rebuttal! :)

    bluesmoke: i'm flattered and would be glad to do the job for free! because i DO love my country and boy do we need somewhere there who acknowledges peak oil....otherwise, i fear we are toast.

    User: good point. if we dont get an energy policy to deal rationally with peak oil, i can envision a scenario where the US gov takes over the big oil companies claiming "national security". i have oftened wondered if this is not the real reason why the US gov is ignoring peak oil and a rational energy policy to deal with it. once they control the oil, the have ultimate control over the population.

    GMiki: that's right - non-peakers always talk about the new oil discoveries, but they never factor in the worldwide depletion rates of the current fields, currently depleting at the rate of about 4.5 million barrels/day. not to mention that the number of new elephant fields discovered since 1960's has slowed down dramatically, i.e. roughly less than 10 during that entire time.

    enviro: i hear you wrt to the majors. that said, it seems a bit unwise in an era of peak oil not to hold a company that can produce 4 million barrels a day (XOM). i like ConocoPhillips as much for their nat gas exposure and Lukoil as i do for their oil production capability. plus, i Mulva is the best CEO in the business. and, i agree with you about XOM stock buybacks...they should be rewarding their shareholders with increased dividends! they have the lowest yield of the majors, by far, yet the best balance sheet, cash flow, and net income. i would much rather the rutkus at the shareholder's meeting be about the buybacks vs dividends than most of the poop that was discussed there.

    scholastic: well, peak oil has happened many times in many places: continental US, prudoe bay, north sea, mexico's cantrell, etc. etc. the energy crisis of the 1970's was a political crisis (an embargo due to US Israeli policy). what we have now is a true supply/demand crisis due to increased consumption in china, india, russia, and the middle east at the same time production is beginning to top it. sure, we mights see a few million more barrels come online, and some of the top execs (Mulva at CEO) think we could perhaps top at 100 million BPD. that said, the EIA and DOE energy estimates are predicting demand will hit 135 million BPD. that is a huge huge disconnect. the US is the most exposed country in the world to peak oil: we use 20% of the world's oil (5% of the population) and import 65% of that. that is why i am so adamant about the US adopting a comprehensive energy policy to deal with it. time is quickly passing by and the last 8 years have been a complete waste.
























    Reply
  •  
    May 30 12:58 PM
    Brian Pursley - "Allow me to introduce you to some new friends of mine named Barracuda, Caratingua, Tupi, Jupiter, and Carioca."

    So you're suggesting that the ultra deep, with no current technology available to exploit Tupi field will replace Cantrell that bubbled up from the ground?

    Keep smoking
    Reply
  •  
    May 30 01:05 PM
    How much does it cost to convert Coal to liquid via coal gasification technology? That is a realistic long term maximum for the price of a barrel of oil and I think that the number is around $90/barrel. On the other hand, coal gasification produces lots of CO^2 and unless we develop a good way to sequester it, it is a dead end as well. At some point we will reach "peak coal" but that is probably beyond the timespan of even a very forward looking investor.

    Diversification is a no brainer and it is reckless to have all your money concentrated in one or two stocks or even one or two industries. I am personally mostly invested overseas, to protect myself against the falling dollar, but I am invested all over the place, not just in oil and commodities.
    Reply
  •  
    May 30 01:14 PM
    Fitz: Again, the supply is low due to political and not geological factors. The United States has over 10,000 miles of undrilled coastline. Peaks in oil production are caused by man not nature. But like I said I hope you're right. I hope we peak and I become a billionaire because I have my eye on a new Hummer.

    FoxV: Your claim that no current technology is available to exploit Tupi is based upon willful ignorance and a lack of education.

    Petrobras to Start Output at Tupi Ahead of Schedule: www.bloomberg.com/apps...

    "I don't think we face any technical challenges that are insurmountable,'' said Gabrielli, 59. "We think that today the main problem is cost reduction, not availability of technology.'': www.bloomberg.com/apps...

    How's that crack pipe treating you?
    Reply
  •  
    May 30 01:27 PM
    My meandering Vietnam era mind wondered if the real reason we went into Iraq was not to take over the oil (although the mega embassy argues against that) but to disrupt the oil flow. It seems the insurgents do a pretty good job of keeping the Iraqi oil flow limited and the Saudis do a pretty good job of keeping supply shut in. Of course, having a real fighting force of 140,000 +/- American soldiers keeps the Iranians at bay for the time being - it seems to me thats why we put Saddam in there in the first place, to keep the Shiites out of Saudi. Anyway, oil sure has had a nice run since the beginning of the Iraq war and a couple mbd shortfall has kept the price up up up. We might now be seeing some actual elasticity of demand and less consumption as unnecessary usage is voluntarily foregone. W, as an old erl man, has probably secured his place as the greatest president of all time as far as the oil patch is concerned. McCain says we'll be there a good long time so I would expect he will get lots of contributions from the oil folks. This has worked out better than they could possibly have anticipated.
    Reply
  •  
    May 30 01:53 PM
    If you're a peak oil person, as am I, you must realize that China and India and SE Asia are not going to ascend to world prominence via their impressive industrialization. Superexpensive oil means their industrialization stops cold very soon. Europe is going to fall apart as well due to peak oil, so the Euro is now under attack. I"ll go along with the precious metals for inflationary reasons, but it sure looks like the dollar stands to climb back up -- other currencies will be under so much stress.
    Reply
  •  
    May 30 03:18 PM
    To Scott Benson :
    WORD ......
    Reply
  •  
    May 30 04:22 PM
    Let's not forget that it is the RATE of extraction that is important. Yes, Brazil has found a jazillion barrels of oil 30k feet under the sea. But can they pump N million barrels a day out of there to match the decline of the rest of the world?

    Same thing with coal to liquid technology or turkey guts or tar sands or oil share or whatever. Everything needs to ramp up a LOT of replace something like Cantarell in decline.
    Reply
  •  
    May 30 07:08 PM
    The realities of peak oil and the disastrous US monetary policy of the last 8 years have completely changed the rules of investing. I AM ALWAYS SUSPICIOUS OF ANY AUTHOR WHO STRAYS FROM HIS FIELD, IN THIS CASE, FINANCE, TO GET INTO POLITICS. WHAT IS MAGICAL ABOUT 8 YEARS? Pick up any financial publication - be it Money magazine, investment publications from Vanguard, or articles by the lead economists at firms like Schwab and Fidelity and you will still see a common theme: advice from money managers to have a well diversified portfolio. I am here to tell you that this is good advice for them, but terrible advice for you. Here's why. YOU ARE RIGHT.
    Most investment advisors these days continue to promote a nice pie chart which is broken down into easily understandable slices. Typically, these slices include US stocks, international stocks, bonds, and cash. Some investment advisors have added commodities to the pie. Along with the slices, the advisors provide us with percentages, usually indexed to the investors age. Common advice might be something like: 40% US equities, 20% international equities, 20% bonds, 10% commodities and 10% cash. This is simply an example, but you get the idea. RIGHT AGAIN.
    Why do I believe this to be a bad idea? For US investors, the realities of peak oil mean the following: energy prices will continue on an upward climb and therefore inflation will follow. The massive devaluation of the US dollar since Bush took office (>50%) BEING POLITICAL AGAIN. WHY NOT SAY SINCE GREENSPAN RETIRED OR SINCE THE START OF THE 108TH CONGRESS? will simply exacerbate the problem since oil is traded the world over in US dollars (at least for now!). As readers are aware, I have often commented that the US dollar has been replaced as the world's "reserve currency" by a barrel of oil. NOT SURE I AGREE. I DON’T KNOW THE ANSWER, BUT THINK THAT GOLD AND PAPER ARE STILL EASIER TO STORE AND TRADE BECAUSE THE COST OF DELIVERY IS SO LOW BY COMPARISON. Regardless, what do the realities of peak oil mean for the diversified investor?
    Let's take a look at the pie. For the 40% of US equities (remember, these percentages are simply examples), if we assume this to be invested in the S&P500, only 15% of that will be in energy since that is the approximate energy weighting today (energy recently leap-frogged financials in this respect, which is a big red flag in itself for those paying attention). I WISH YOU HAD EXPANDED UPON THIS IDEA. I WANT TO KNOW MORE OF WHY YOU FEEL THIS WAY. So, 15% of 40% and the investor will have roughly 6% of his money in energy. Hmmm...that's not very good. Considering the last 10 years NOW HE IS USING A DISPASIONATE AND NON POLITICAL DATE the S&P500 has returned around 3.5%, now wonder people are complaining about their portfolios balances! Meanwhile, in that same period, many energy investments OLD ‘LYING WITH STATISTICS’ TRICK – USE A SPECIFIC TO SHOW ONE SIDE OF THE ARGUMENT AND A GENERALIZATION FOR THE OTHER SIDE – APPLES TO ORANGES have been up 25-30% per year.
    International equities is a bit of a different, and better, story. The falling US dollar has been a boon for foreign investments. Those investors which WHO have been astute at foreign market picks have really done well. That said, in the future investors would be well advised to keep their foreign investments in countries that produce oil: Brazil and Russia come to my mind. WHAT ABOUT STABILITY OF THE GOVERNMENT?
    Most US bonds and fixed income in general is dead money. With low US interest rates (2.5%), high inflation (over 5%, don't believe the government data, which everyone knows is fudged), and a US currency that has been dropping 6-7% per year, most US fixed income investments are simply a way to fall behind in terms of capital preservation, let alone capital appreciation. COMPLETE AGREEMENT. I THINK REAL INFLATION IS WELL OVER 5%.
    Commodities is a good bet. If the investment pie has a 10% slice in commodities, shake your advisor's hand. Oil, natural gas, gold, silver, wheat, cotton and soy beans are all good. These investments are real, or hard, assets and will surely help the US investors keep pace with inflation and a devalued currency. I WOULD ADD COPPER AND NICKEL.
    "Cash" is a bad idea unless you place it in US dollar hedges like the Merk Hard Currency Fund [MERKX] or the Prudent Global Income Fund [PSAFX]. Cash simply won't keep up with inflation and the falling currency. AGREE AGAIN.
    So, of the investment pie the professionals advise, only 21% SHOULD BE 16% are in assets that protect the investor from the realities of peak oil and a devalued currency: the 6% in energy and the 10% in commodities. Over the past 10 years, this formula would have been a losing proposition once inflation and the falling value of the dollar are taken into account.
    What's an investor to do? First of all, forget diversification - it is a way to the poor house in the years ahead. Forget the S&P500 and US bonds. Concentrate your money in energy, precious metals, and commodities. Period. I THINK THERE IS ALSO A PLACE FOR REAL ESTATE IF ONLY A PROPERTY FROM WHICH YOU CAN GROW A MAJORITY OF YOUR FOOD NEEDS, PREFERABLY OFF THE GRID.
    Here are some great choices to outperform the market in the coming years (in no particular order):

    . ConocoPhillips (COP)
    . Exxon Mobil (XOM)
    . Chevron (CVX)
    . StatOil (STO)
    . Schlumberger (SLB)
    . Nabors Industries (NBR)
    . Chesapeake Energy (CHK)
    . Anadarko Petroleum (APC)
    . GLD (Gold ETF)
    . DBC (Commodities ETF)
    . Vanguard Energy [VGENX]
    . Vanguard Precious Metals [VGPMX]
    . Fidelity Select Energy Services [FSESX]
    . Fidelity Select Natural Gas [FSNGX]
    . Merk Hard Currency Fund [MERKX]
    . Prudent Global Income Fund [PSAFX]

    Buy these stocks, funds, and ETFs and just hold them. Don't let day-to-day headlines or huge energy volatility scare you out of these positions and you will do fine over time. As an aside, the oil inventory report just came out today, and oil inventories were down over 8 million barrels, a big big surprise versus estimates. Anyone remember Gomer Pyle - "Surprise, surprise, surprise!" Still, there is no comprehensive US energy policy out of Washington, DC. AGAIN, VENTURING INTO THE POLITICAL BUT I THINK OUR 'ENERGY POLICY' CHANGES WITH EVERY NEW CONGRESS.
    Dow Chemical yesterday specifically pointed to the lack of a comprehensive US energy policy as a big reason for having to raise its prices. This is a scenario the investor should get used to, and be prepared for in the years ahead.
    Meantime, if you'd like to send your Congressman/woman or Senator a real comprehensive energy policy, please send them this link.
    It will definitely be the most patriotic action you take this day. Thank you!

    GOOD PIECE. WHEN I GET THE TIME THIS WEEKEND, I WILL GO TO THE LINK AND READ THE ‘ENERGY POLICY.’ THIS COMMENT IS MEANT TO BE CONSTRUCTIVE, NOT DISTRUCTIVE. DROP THE POLITICS AND AVOID THE TEMPTATION TO SENSATIONALIZE WITH STATISTICAL GAMES AND I WOULD CALL THIS AN EXCELLENT PIECE. THANKS.
    Reply
  •  
    May 30 11:45 PM
    This article and it's comments remind me of the AAPL articles about how wonderful Jobs is and the idiot comments that always follow.

    I love hindsight - don't diversify because we can't possibly be WRONG!

    Honestly since peak oil is a certainty and it can only go up, it's so damn easy to make an investment decision.

    I'd rather make boring above index returns than gamble on the 'it's different this time' crowd anyday.
    Reply
  •  
    May 31 01:53 AM
    I agree with the big picture in this article and am relieved to see so many others agree with what my gut is telling me to do financially. I was starting to worry that I wasn't "diversified enough" but don't feel good about the S&P or the traditional advice. We've been investing overseas with an emphasis on energy, commodities and infrastructure and using MERKX as a hedge with our cash.

    We are also looking at alternative energy companies such as solar, wind, geothermal and even the newer wave power (eg Finavera) given that they should do well as oil continues to rise in price.
    (disclaimer - we just bought some Finavera stock and are hoping they'll do well. Still figuring out what geothermal and solar stocks or etfs to buy....)
    Reply
  •  
    May 31 08:14 AM
    I'm with maxroom (way back in the early comments). Give me Canroys for the next 10 years, and natural gas and utilities. I'm making more in dividends than I could even think of spending in increased gasoline costs. I'm not a big money investor, nor am I opposed to some of the financial stocks, but for right now, I'm about 50% into the fuel stocks and splitting the rest. No ETFs for me because the yield isn't nearly good enough. In a few years, I'll think about it, but for now, I'm looking for better yield.
    Reply
  •  
    May 31 09:54 AM
    Hello Fitz; You are now on my radar. My gut tells me you are right perhaps because my holdings are similar to your recommendation. However, I prefer the non precious metals over the glitz. You realize you have opened Pandora's box and demoralized the brilliant advisers that never get it right (except for Buffet) and rely on diversification for their kudos or excuse. You might as well open another box and suggest that mutual funds are as dead as a door nail and are about to go the way of the horse and buggy. ETF's are so much more efficient and with better performance. My days of being penalized by MF's for fast trades and inflexibility are over. Just compare EWZ, KOL, IEZ, and FCG to similar mutual funds at Fidelity, Vanguard and/or T Rowe Price and you'll understand my position. PG
    Reply
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    May 31 09:56 AM
    You might be LUCKY to be in the OIL, Precious Metals.... but if the "demand" for these goes down... your portfolio will go down. I say you are LUCKY, since CHINDIA & emerging markets are keeping the demand up. So, you can keep your course for a year or two, but what are you going to do then?????

    One area, I like RIGHT NOW is technology stocks (especially software). We should see CVLT, ORCL, SAP, GSB, AMSWA/LGTY, and numerous others... accelerate in their stock price. MSFT is too large (like XOM) to make major moves. Let's see what happens in TECH STOCKS during the next 6 months (in comparison to your portfolio).
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    May 31 10:31 AM