Peak oil: Investors and Fund Managers

[PowerSwitchJames]

Today was interesting. I went to a mini-conference hosted by a large financial institution, with mostly (climate change aware) fairly major investors and fund managers managers present. It was Chatham house rules, so I can't really say who said what.

Three interesting things came out of it for me though.

(1) ALL of the 50 or so investors/fund managers there were fully aware of peak oil and did not disagree with the proposed situation
(2) One analyst though said that very very few of the questions he generally gets from investors is peak oil aware and is very short term focussed (no real surprise there!)
(3) The analyst proposed three scenarios, and described that if what peak oil proponents generally propose (i.e. global supply decline begins pretty soon and not much is done to offset it) then it is a nightmare scenario.

Anyway, pretty, pretty interesting. It was suggested, I think by Colin Campbell, that as soon as the 'peak oil' cat was out of the bag that the financial system would collapse on itself in the rush to move investments. That isn't happening yet as awareness among investors isn't so widespread, but a strong seed is there. I'm sure such a herd mentality will kick in during crunch times, but I also retain a slither of hope that maybe the investment community will be smart, see the trouble coming, and divert their flow of capital to soften the blow. Can only hope!

[postie]

(1) ALL of the 50 or so investors/fund managers there were fully aware of peak oil and did not disagree with the proposed situation
(2) One analyst though said that very very few of the questions he generally gets from investors is peak oil aware and is very short term focussed (no real surprise there!)
(3) The analyst proposed three scenarios, and described that if what peak oil proponents generally propose (i.e. global supply decline begins pretty soon and not much is done to offset it) then it is a nightmare scenario.

That is interesting indeed!

I have a few questions from the points above. From point 1, is it common amongst investors to know about PO, or was this mini-conference aimed at people already in the know? Or did they come with half an understanding?
from Point 2: Wouldn't it be detrimental to a fund manager to tell an investor about PO.. especially if they're looking at medium long term profits?
from point 3: Could you explain the 3 scenarios the analyst proposed, and how does that affect investors especially? (I'm not an investor btw.. I can barely afford to invest in my next pint of beer atm)

[Totally_Baffled]

from point 3: Could you explain the 3 scenarios the analyst proposed, and how does that affect investors especially? (I'm not an investor btw.. I can barely afford to invest in my next pint of beer atm)

Beat me to it, would such a nightmare scenario - mean the topic of investment, and being an investor, become irrelevant?

No point having a great portfolio if you find yourself in the cooking pot of the local starving hordes!

[AutomaticEarth]

Thanks for the post....In additon to the points / questions above, did anyone there indicate / iterate what sort of timescales that the peak might drop off into a decline?

Lots of articles / reports among POers seem to be pointing to the peak (excluding gas) holding up till about 2012-15 before the decline is likely to start. Do these fund managers (at least the PO-aware ones) seem to broadly agree?

[DominicJ]

Anyway, pretty, pretty interesting. It was suggested, I think by Colin Campbell, that as soon as the 'peak oil' cat was out of the bag that the financial system would collapse on itself in the rush to move investments. That isn't happening yet as awareness among investors isn't so widespread, but a strong seed is there. I'm sure such a herd mentality will kick in during crunch times, but I also retain a slither of hope that maybe the investment community will be smart, see the trouble coming, and divert their flow of capital to soften the blow. Can only hope!

The problem is, individual investors can pull their investment out of doomed enterprises, only by selling them to some one else.
If you've spent a billion dollars designing the Hummer MkIV, you cant decide it was a bad idea and ask the designers to pay back their wages and the electricity company to refund your usage.
Your only option is to sell the company to a bigger idiot.

Once the investment community as whole cottons on to the fact that we're ****ed, there will be no idiot to sell your Hummer designs to.

The Banking System cant be saved, it never could, losses bigger than any government can make good had already occured, just not recognised. If you beat the rush, you could pass those losses to an unsuspecting chump.

[vtsnowedin]

It will a long time after the cat is out of the bag before you run out of idiots.
You have the problem well described though.Switching from oil based investment prospects to the investments that will make money after the oil is gone will create chaos and panic in the markets. Reason being that everything investors have been taught or learned about how to plan ahead will be dead wrong and it will be a race to discover the new rules and potential profits.

[Tangata]

well I've no investments as such, but do have a work based pension, which has built up a moderate pot of dosh over the last few years. As mentioned on another thread I've found a relatively cheap SIPP provider (£250 a year) that allows investments in Bullionvault, so I'm in the process of moving this pension pot into gold.

As a hedge incase some bright spark cracks nuclear fusion and things continue BAU I'm going to keep paying into the 'normal' work pension (simply because my employer gives me free money for it) - but I'm still not sure what's the most sensible fund to go with out of the limited choice available

Of course if everything goes completly tits up, then I guess I'll try to swap the lot for a bag of spuds....

[vtsnowedin]

well I've no investments as such, but do have a work based pension, which has built up a moderate pot of dosh over the last few years. As mentioned on another thread I've found a relatively cheap SIPP provider (£250 a year) that allows investments in Bullionvault, so I'm in the process of moving this pension pot into gold.

As a hedge incase some bright spark cracks nuclear fusion and things continue BAU I'm going to keep paying into the 'normal' work pension (simply because my employer gives me free money for it) - but I'm still not sure what's the most sensible fund to go with out of the limited choice available

Of course if everything goes completly tits up, then I guess I'll try to swap the lot for a bag of spuds....

I'd be cautious of putting a high percentage of my assets into gold. I watched a friend put everything he had into gold and coins back twenty years ago when it was $700 an ounce. As soon as they had everyone sucked in as far as they would go the short sellers came out of the woodwork and gold fell to $300 and stayed there for about a decade. With the amount of hype you see about gold now they are about ready to make their kill then buy back their stock for fifty cents on the dollar.
When you buy that sack of spuds see if you can buy a spot of ground to plant them and grow a years worth plus get your seed back.

[2 As and a B]

It was suggested, I think by Colin Campbell, that as soon as the 'peak oil' cat was out of the bag that the financial system would collapse on itself in the rush to move investments. ... I'm sure such a herd mentality will kick in during crunch times, but I also retain a slither of hope that maybe the investment community will be smart, see the trouble coming, and divert their flow of capital to soften the blow.

Was anything said about what they would move out of and what they would move into?

[Tangata]

I'd be cautious of putting a high percentage of my assets into gold. I watched a friend put everything he had into gold and coins back twenty years ago when it was $700 an ounce. As soon as they had everyone sucked in as far as they would go the short sellers came out of the woodwork and gold fell to $300 and stayed there for about a decade. With the amount of hype you see about gold now they are about ready to make their kill then buy back their stock for fifty cents on the dollar.
When you buy that sack of spuds see if you can buy a spot of ground to plant them and grow a years worth plus get your seed back.

Yes, I know this is a possibility, but I'm 20 years off retirement, and so I have no access to this money, and I cant see how keeping it invested in stock market funds is going to be any safer. Buying land does seem to be a sensible option too, but isn't as straightforward and hassle free as buying gold using something like bullionvault.

I'd be very interested to hear what suggestions the fund managers mentioned by the original poster had.

[Lord Beria3]

I wouldn't put more than a quarter of your assets into gold.

Important to diversify.

[Lord Beria3]

Investing in relation to PO (for example pensions) is a interesting question...

For the hard crash crowd, of course in the event of a collapse of civilisation due to shortages of oil - stock up on a few months worth of tinned food, get your allotment going and have a useful skills learnt but beyond that, there is little to do for this eventuality.

So, assuming that the above DOESN'T happen, and the current systems like banking, stock markets and industrialised economies continue, however choppy, how does one invest to try to keep your wealth and hopefully increase it?

Here is my guide...

1) Invest a portion of your wealth into commodities, including land and agriculture in general, oil and gold/silver.

2) Luxury market - the superrich and the rising economies in the East will carry on growing for at least a further decade... they want the luxury goods of the West, invest in these companies and you should be alright.

3) Invest in solid companies exposed to emerging markets... there are some excellant funds which do this.

4) For safety, put some money into index linked governments bond... but my advise would be not too much, the government debt situation in the West is grim.

Finally, the global uber-rich increasingly see international real estate (in places like Mayfair, Manhatton etc) as akin to gold, physical assets which are a essential part of a billionaires portfolio.

Invest in this area, for example in this fund (mimimum investment £1000) to ensure that you take advantage of this global trend.

The recent chaos in Egypt only strengthens the logic in investing in the super-prime areas of the Old West... safe, secure and beautiful - a perfect refuge in the event of anarchy in China, Saudi Arabia, Russia or elsewhere in the future...

http://www.dngim.com/pdf-downloads/PLCF ... Record.pdf

Of course, the hard crash crowd will sneer, but if you are not interested, don't bother replying!!!

[DominicJ]

I am not legaly allowed to give investment advice, and dont have the best record (although not bad either), so this isnt advice.
I prefer Silver to Gold.

Dont believe the claims its going to fly into space because its an important industrial metal, however, that its an important industrial metal does put something of a floor under the price.
Realisticaly, Gold has almost no application at even 1% of its current price, Silver does at current prices.

VT
Gold crashed last time when FedRes Rates went to 20%.
If that happens again, the same will occur.

[biffvernon]

Trouble with gold is that increasing demand encourages folk to mess up the countryside. Gold mining is a very destructive process. This picture:

http://maps.google.co.uk/maps?source=s_ ... 1&t=h&z=15

shows mine tailings and cyanide poisoned ponds in Romania. Here's a picture of the church that is soon to be destroyed by the gold mine:

http://www.financialpost.com/call+prote ... story.html

We happen to have a Romanian staying with us who comes from this place. She is very upset about the people who buy gold and cause the destruction of her grandmother's home.

[Blue Peter]

As a matter of interest, James, why were you present? Are you an investment manager?


Peter.