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Welcome. The content below is free to the public. It might be worth what you are paying for it. Having studied economics and being in finance for over two decades, I have learned that only one thing is certain - that almost nothing is certain. As we endeavor to come up with our best analysis of the world around us, the opportunities and risks, we have to try to overcome a myriad of issues including our own ignorance, biases and emotions. What follows are my attempts to overcome those obstacles. Welcome to my view - publishing Monday and Friday afternoons.
War is not something that we want to think about, but it is a reality in the world. Since peaking in severity with World War II, there have been a series of wars, for the most part with decreasing severity. Since 2010 however, a new trend has started to emerge. Whether it is a blip or a harbinger of a larger conflict, the sort of which we have not seen since the Korean War, is as yet unknown.
I do not mean to hype, however, I believe we are looking straight into the face of an asymmetric profit opportunity. This is the type of buy low, reduced risk chance to generate real wealth that only comes around about once per decade. Soon, oil and gas prices will reverse course. When that happens, the companies that survived this oil and gas crash will be operating in an environment with not only higher oil and gas prices, but less competition and nations motivated to keep oil and gas prices high. Just like survivors of other crashes have racked up huge gains, so too will the strongest survivors of oil and gas crash of 2014-15.
In autumn of 2011, I wrote in MarketWatch's "Next Great Investment Columnist" competition, that one thing was going to change everything for America. That one thing was the development of our own natural gas and oil reserves. My analysis landed me a spot on MarketWatch.com of the Wall Street Journal network in November of 2011. A few weeks later, Citigroup and Goldman Sachs made public their research that agreed with mine.
The middle two quarters of the year were rough for me. Not only did I get into energy after it had declined 30-50% which was just in time to see it drop another 30-50%, but my hedges for what has happened August and September, expired in June. Arrrghhh. Being right isn't always good enough, sometimes, timing does matter. Luckily, most of my energy investments are stock, so the calendar is on my side.
I am still heavy cash, but less so after the purchases listed in the past month. If you are still sitting 25-50% cash, you should be thinking about a scaling in approach. Don't delude yourself into thinking that you can catch absolute bottoms. You can't. Nobody can. Not with any regularity anyway. You'll catch some bottoms, others you will miss. That's life.
This week I finally declared "The Bear Market has Begun" on MarketWatch. If you are sitting 25% to 50% cash as I suggested repeatedly earlier this year, even with haircuts on the energy stocks we've accumulated, you are sitting in a good position to buy great companies at panic pricing in the not too distant future. As we accumulate, remember, it's not about catching the bottoms, it's about investing below the mean pricing we expect over a full cycle.
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