A Picture Of Crude Oil Reserves Tell Me A Thousand Words

What is this Crude Oil Reserves graphic saying to me?
It tells me that Australia is a minnow and it’s more of a LNG nation.
It tells me why integrated European and American oil companies enter joint ventures in foreign lands, ’cause that’s where the oil is.
And the U.S. is playing an interesting game of being the worlds largest oil producer against reserves that don’t suggest that status being sustainable.
Prior to the March 2020 collapse in oil prices, the U.S. was pumping a world leading 15 million barrels per day.
If the U.S. reduces daily production to let’s say 12 million barrels (not because Trump thinks he can force privatised companies to do so but more so relating to the global supply glut), then when dividend into their reserves of 37 Giga barrels, the United States will have 3,083 days or 8.4 years of reserves left.
That’s acute enough to create tension across politics and the oil price.
Incidentally, Saudi’s daily production is 12 million barrels.
– May 26, 2020, by Rob Zdravevski
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Ignore the noise & be patient

As an investor, do you find yourself “jumping at shadows” with the smallest hint of (real or perceived) bad news?

Are you truly as much of a longer term investor, which you say you are? I implore my clients to really think about this question. If not, it’s best that you cut yourself some slack & confusion , by admitting that you are a speculator.

Major equity markets have staged a wonderful rally with most of them re-visiting their levels of last August or October. If you focused on hunting for bargains and overreactions, you would have used the months of November and December to add to your portfolio.

Some “shadow jumpers”, “Trump deflectors” and “trade war worriers” may have riddled themselves with worry or worse yet, panic, which may have resulted in a poorly thought out decision to sell your securities during this time. It takes time for investments to mature.

Once the analysis and thesis is developed, formed and capital deployed, it doesn’t mean that the “payoff” occurs within the time it takes to run a horse race.

And through the period of the thesis being proved and confirmed, there will be volatility and pricing hijinks. Interestingly, the price action of the indices below are suggesting new long term trends are being confirmed.


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Understanding Volatility

Courtesy of: Visual Capitalist

“>http://<div style=”clear:both”><a href=”https://www.visualcapitalist.com/5-lessons-about-volatility-to-learn-from-the-history-of-markets/”><img src=”https://2oqz471sa19h3vbwa53m33yj-wpengine.netdna-ssl.com/wp-content/uploads/2019/02/volatility-history-infographic.jpg&#8221; border=”0″ />

Courtesy of: Visual Capitalist

You are missing out if you only invest in Australian equities

The overwhelming bia and perhaps “comfort” which Australian investors exhibit and seek by either solely or heavily investing in their domestic equity market has proved to be a substandard strategy over the past 20 years.

Larger, developed markets have outperformed the ASX 200 over this greater period of time.

My anecdotal experience whilst being an Australian domiciled stockbroker who focused and specialised in “overseas” equities, from investors who shunned international securities included them telling me that “at last they can drive by and ‘touch’ the company” which they are invested in, or some may have justified their strategy by convincing themselves they could conduct their research more easily by knowing the Australian company better.

I find these type of justifications quite weak and poorly founded.

It’s highly unlikely that an investor in BHP has researched or visited all or most of their sites, offices and operations located in Australia and the same would be the case if one analysed a power, supermarket or healthcare business.

Interestingly, Australians probably use more products and services from overseas corporations than they care to admit.

Whether its Google, Ford, Facebook, Dropbox, Sony, Bayer, Siemens, Netflix etcetera, etcetera……

I fear, that the government “sponsored” or “promoted” programs of negative gearing, franking dividend credits and perpetual money flow into superannuation will continue to allow “local” only biased Australian investors to continue doing themselves an investing disservice for decades to come.


It’s time to look at emerging markets again

I think the developed equity world is not cheap, while emerging markets are. For those hunting GDP growth, take a look at this infographic from http://www.visualcapitalist.com

It leads me to ask, how will you position your portfolio for the next 10-15 years?


Chart: The World's Largest 10 Economies in 2030

Not owning Aussie banks has saved you money

For 5 years I have advised clients to steer clear of owning shares in Australian banks.

Telling people when to sell, avoid or hide, not only saves & protects their capital but isn’t displayed in their annual summary of portfolio returns.

Such analysis and advice is unquantifiable yet it has proven to be invaluable.

It remains a difficult concept to explain to prospective clients.

Here are the 5 year price charts of CBA & NAB.


Don’t own a home, own businesses

This chart sourced from visualcapitalist.com shows the percentage of assets that people of differing “wealth brackets” tend to favour.

It may prove the theory that wealthier people allocate their money to assets and businesses whilst others tend to spend their money on “stuff”.

Also interesting is the significant weighting of money that the primary residence and vehicles categories account for amongst the first couple “wealth” bands.

This could prove why conversations around motor vehicle (sales, servicing, repairs, parts, insurance) and real estate (buying, selling, renting, furnishing, maintaining) are so prominent in our daily lives.

These two assets (or liabilities) are also enormous revenue raisers for governments. Just think of the registration fees, stamp duties, fuel excises, luxury car tax to mention a few.

I’d like to think that this data could provide the basis for our cultural and government propaganda surrounding the great dream of buying a house. For, if we believe in the “dream”, we’ll take out a notable mortgage to acquire a home and this will require us to stay in the workforce in order to service our debt, all in while, we are paying taxes and providing the labour force for the businesses which the wealthier bands of citizens own.

Maybe my conspiracy theory for the month.

Either way, I think the chart below is quite interesting.


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