Today I am going to muse on the topic of where to deploy one's hard earned boodle, should one have any boodle (hard earned or not) to deploy. The following is not investment advice, just some thoughts on investments that might offer decent returns or perhaps just safe havens in our volatile investment universe. The time horizon for the as yet to be named investments is not tomorrow, or even next week, though price appreciation between now and then certainly can't be ruled out. To be precise, the investments I have in mind are meant to hold up in real terms, i.e. adjusted for inflation, over the span of many months and years.
My world view is such that I subscribe to Peak Oil and Gas as well as Global Warming, and therefore, as one might imagine, my investment outlook is biased towards investments in natural resources. However, that does not mean I think buying shares in Exxon Mobil, Marathon, or BP, or any of the other major petroleum companies is warranted at this precise moment. Price appreciation in the aforementioned has surely been impressive over the last few years, but there are several factors that make me cautious about such investments going forward. First, we may be, believe or not, and most will surely not, on the cusp of a severe deflation. Perhaps the best evidence that such a scenario is more than a little possible, is that almost no one thinks it remotely possible. In fact, the mere suggestion that deflation might be in our financial future is generally met with scorn and derision. So at the risk of being scorned, I'll explore some deflationary scenarios.
Were Peak Oil to be the proximate cause of a deflation, then oil investments, and most raw material investments would be, for a time, absurdly profitable provided the operations of the aforesaid were not subject to interference or cessation due to armed conflict, sudden crushing taxation or outright confiscation, all distinct possibilities as things would, by an order of magnitude, be more desperate than they are even now. However, were the catalyst for severe deflation be the result of a calamity in the world's financial structure, or due to, oh, say, the outbreak of a global avian flu epidemic, then, petroleum and mineral investments would, along with everything else, collapse like a tin shack in a typhoon.
Obviously, if the inflation we are now experiencing persists, or morphs into hyper-inflation, then any and all commodities will continue to outperform all other assets. Bear in mind that this outcome is the one that the vast majority cling to with an almost religious fervor. It is certainly true that in fiat based economies, which are all we have, all roads lead to inflation, and it is equally true that India and China are incipient economic behemoths seemingly smack dab in the middle of their growth spurts. However, despite these truths, there are massive imbalances in the global economy that will, in time, and perhaps sooner rather than later, rear their ugly head in such a way as to badly upset the happy apple cart that has heretefore given rise to fat profits in global shares. Next time, I will discuss my favorite investments. Hint: the title of my next post will be Amber Fields of Grain.