139: The End of the Bull Run
Asset price risks are very high. There has been an unprecedented house price boom. No-one can be sure whether this boom has created a bubble or not. Is there a bubble that will burst? Fixed interest rates in the
Meanwhile, there is a possibility the world have reach “Peak Oil” – this is when oil production is no longer capable of growing and instead enters a period of terminal decline.
So how do property investors protect themselves from rising oil prices? There are a number of ways:
· Invest in property in oil towns around the world (
· Invest in financial centres heavily exposed to oil money (
· Invest in oil and gas companies (operating companies)
· Invest in oil and gas services companies (drilling rigs)
· Divest out of property if you believe property prices will crash (we give a 10% chance of a crash) – re-enter the market after the crash
Stock Market Volatility
Meanwhile, stock markets have been rising mainly off the back of increasing corporate earnings growth. If oil prices rise and inflation increases, leading to lowering GDP growth, then earnings will likely drop and hence stock prices will come down. It is a particularly exposed period for stock markets because there has been a bull run since 2001 (6 years) and we are now into the summer period. Often the Money Managers and Private Equity Investors sell large parts of their portfolio before heading on extended holiday in June until late September. So do not be surprised to see a big correction in the next 4 weeks.
So what new businesses could you invest in, that would protect against the end of an asset bull run? The world has a massively increasing population thirsty for:
If you invest in property anyway, on the basis that there is a shortage of overall physical resources, you might also consider water, oil, gas, coal and minerals. The latest thinking is that “climate change” is here to stay. Water will become scarce. Renewable energy sources that use a lot of water such as forestry, ethanol and bio-diesel (from corn) will likely be hit by a water lobby. Oil and gas will likely be the winner, because they do not require water to produce energy - oil and gas are also concentrated energy sources. Coal will become more important and valuable for energy. But please always consider the shortage of water – all the fancy ideas about helping the environment that use lots of water will eventually be thrown out. Hydro-electric power plants that can help solve water shortages will become more popular. But the emotion of water and land shortages along with oil and gas (energy / electricity shortages) will likely lead to instability at best, and war at worst.
So when you tactically or strategically decide where to invest, it’s best to consider all these aspects when “putting your money on the table”. Examples of countries that have a high attractiveness on the water, oil, gas, land and minerals side are:
These countries have got all four.