Jim Letourneau's Blog

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What Everyone Ought to Know About Hard Assets Investing

Here are the key points from my Main Hall presentation at the New York Hard Assets Investment Conference. Of course I don't know what people don't know... I had to guess.

I started with a meditation from Douglas Adams from Mostly Harmless:

Protect me from knowing what I don't need to know.

Protect me from even knowing that there are things to know that I don't know.

Protect me from knowing that I decided not to know about the things that I decided not to know about. Amen. ~

  • Commodity prices are not the same as commodity related stock prices.

  • Every degree of separation from owning the physical commodity adds a degree of risk to your investment.

  • Opportunities come when there are dislocations in price/politics

  • Lack of pure plays.

  • The commodity bull market is not one market

  • DO not forget currency risk.

  • Commodity Bull Markets Always End

I'll elaborate on the last two points because they don't get discussed very often. Canadians are pretty happy about the near 30% increase in the value of the C$ vs. US$ over the last 2 and a half years. Something to think about when you're agonizing over low interest rates. Of course all the scrolling numbers on CNBC are in US$. Currency matters.

Of course nobody, and I mean NOBODY saw the massive buildup in natural gas supply coming. I don't think we'll see a true bull market in natural gas prices for many decades. Oh sure, if oil prices are $200/bbl and all the rigs are drilling for oil instead of natural gas we could see prices increase but it won't take long to fill any supply gaps. We know where the gas is, how much is there, and how to extract it. Bull market over, at least for natural gas. What commodity will be next?