Private Equity

There is a New WAR in progress…

guns in new warA new silent war is under way with old weapons being used. These include barrels of oil, gas pumps, and the good old U.S. Dollar. (Sorry… no positive mental attitude articles this week.)

With new technologies, including fracking, new discoveries in the continental United States, and historic high prices to support reclamation and recovery, the U.S. has literally become energy independent. The global implications are wide-reaching and influence the geo-political landscape.

The last time imports were at these levels, crude oil was trading at $10-$15 barrel.

As pointed out by our advisory team member, Eddie Leong, coming from 30 years’ experience at ExxonMobil, this all could be trying to influence insurgencies in Syria, Iran, and Iraq, as well as keep Russia at bay. Mr. Leong goes on to explain that the USA can afford to keep attempting to lower the oil price and even provide a similar QE scheme to oil producers in USA.  It is only to last for a year or so to achieve their bigger aims.  Forcing the oil price down could also cripple the insurgents in Iraq and Syria as their financiers cannot support them anymore. He further clarifies that “with the U.S. producing almost enough for their own needs, they can afford to play this oil game”.

Predictions are now being revamped to under $50/barrel with some pointing a view back to $20. These numbers might seem outlandish, but no more than when we called for oil last year to go to $75 (when it was at $125), when people called for $2,000 gold at $325/ gold, oil at $100 barrel when it was $10 in 1984, or $1 copper when it was 60 cents. By the way, copper has been over $3 for years.

What goes up must come down.

These movements will have implications for the U.S. Dollar (see the video) and its denominated investments, as well as gold. (With no inflation, gold doesn’t have a chance to hold at $800, as some predict). There are people calling for parity with the Euro. This would be a 20% move from here. One must never say never, as these are all massive cycles that have happened before. If you are a student of multi-year cycles, you know. If you know; you can benefit. Monies put into USD denominated investments stand to gain an additional 20% in the coming one to two years, if this happens, just in exchange rates.

So this kind of war isn’t necessarily bad as countries like japan, India, and China will benefit from drastically lower oil.

As always these are our opinions and not necessarily consistent with your own personal advisors that we stress to talk to before making any decisions on finances.

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