Why cash is king in 2018… How bear markets can be your best friend… The death of oil… In the mailbag: “At what point do people get fed up and rebel?”…
When we left off last week, we were showing you what’s ahead as cars and trucks go electric and self-driving.
And judging by your feedback (see today’s mailbag below) it struck a chord.
As promised, in today’s essay, we’re going to take a deeper dive into the geopolitical implications of the EV and autonomous vehicle (AV) revolutions… by turning back to the insights of legendary speculator and Legacy Research cofounder Doug Casey.
But first, we turn to another regular theme here at The Daily Cut – the mounting signs a bear market is close at hand.
According to a recent research note by Deutsche Bank, 89% of assets have handed investors losses in U.S. dollar terms this year.
Said another way, sitting in cash has beaten all but 11% of possible investments you could have made this year.
That’s the best performance for the buck relative to other investments going back to 1901.
And cash isn’t a top-performing asset when investors are in “risk on” mode. Cash beats other assets when they go “risk off.” In other words, when investors are worried about lower asset prices ahead.
Opinions vary here at Legacy on when the next bear market will strike. But one thing we all agree on is that another bear is inevitable.
And when we’re already 10 years into the second-longest bull market on record… we’re long past the days when we could say we were early in the bull market cycle.
So now’s a great time to do a simple portfolio check-up… and make sure you have plenty of cash on board.
But they can be a value investor’s best friend.
During bear markets, quality assets sell for bargain-counter prices.
That’s why you want to make sure you have plenty of cash to take advantage of those discounts.
So set aside a couple of hours to look over each of the investments you own. Ask yourself, “Would I be happy owning this through 20%… 30%… even 50% plunges in the next bear market?”
If the answer is no, consider selling your weakest positions and raising cash. Not only will it dampen your losses in a bear market in stocks… it will also allow you to go shopping when stocks start selling at the bargain counter.
Most folks have heard of these twin transport revolutions.
But they haven’t yet fully grasped that they’re going to turn the world upside down.
There are direct ways to profit, such as investing in the metals needed for the rechargeable batteries that power EVs… Or investing in the tech trends driving this transportation revolution – such as 5G mobile communications networks. (More on that in future dispatches.)
But some sectors are going to get hit – even wiped out – by this shift. The EV and AV revolution could even take down entire nations.
And you’ll want to make sure you don’t have all your savings invested there.
The Saudis and the Russians are the world’s No. 1 and No. 2 exporters of oil. And about three-quarters of global oil production is used for transportation.
As EVs and AVs replace internal combustion engine fleets, oil demand will sag… and oil prices will fall. And that’s bad news for these oil-dependent nations.
Here’s Doug with more…
Many countries, mostly in the Muslim world, produce nothing except oil. They got lucky the stuff was buried under their sand, and Westerners showed them what to do with it.
However, most of them have frittered away the proceeds, and now they don’t know how to do anything but produce a surplus of unskilled people. Those places are going to collapse.
This will also affect Russia, which is essentially just a gas station with an attached gun store in the middle of a wheat field.
It’s not just governments that should be taking note. These changes will affect investors, too – and not just oil investors. Doug again…
EVs and AVs will put a cap on petroleum prices. There’s going to be a glut of oil. Petroleum’s main use is basically going to be a feed stock for plastics and things of that nature.
It’s also going to collapse the production, if not the prices, of corn, palm oil, and perhaps sugar as well, because so much of those crops are – idiotically – used as biofuels.
Based on that, it doesn’t make any sense to own an oil company for the long-term. Pipelines, tank farms, refineries… there will be a lot less of them.
But it’s not all bad news. There are going to be big winners from the EV and AV shift, too.
Doug is bullish on nuclear power. In large part, that’s down to what’s happening with EVs and AVs. Here’s Doug again…
The whole world is going electric. Fossil fuels are no longer going to be fuels. They’re going to be basically feed stocks – primarily plastics, fertilizers, chemicals, lubricants, and the like. The demand for gasoline and diesel – which is the vast majority of oil usage – is going way down.
I’ve long been a believer that nuclear is by far the safest, cheapest, and cleanest form of mass power generation. One of the real bright sides about the change to EVs is that it will greatly increase the demand for electricity, and there will be a boom in nuclear, which is the only sensible way to provide it.
For more on Doug’s take on why nuclear energy… and uranium… make for interesting speculations right now, catch up on his recent two-part conversation with natural resource investing legend Rick Rule here and here.
Tomorrow, we’ll look at the new tech that makes the EV and AV revolution all possible… and how you can profit.
After last Thursday’s Cut, readers wonder what the future will look like when electric and self-driving vehicles take over…
One need only add the Social Credit System to self-driving vehicles to see another huge chunk of freedom destroyed. The system will be in control of where those vehicles go.
If you aren’t approved for travel to certain locations, the vehicles will decline your requests to take you there. Everyone will be tracked (more so than currently as with mobile phones) and micromanaged in that environment. At what point do people get fed up and rebel?
While self-driven cars will be a godsend to transport all the drivers who will lose their licenses for driving under the influence of pot and other additives, I still see hybrids as a better choice for the rest of us. They make their own electricity when it is inconvenient (or impossible) to charge them from an outside source.
– Janice M.
Let us get them going in the main street. I want to feel safe of nincompoop drivers, not to worry what damage one of the many idiots will cause to me or my property.
– Attila F.
So you see a future full of self-driving cars with no or very little car ownership either allowed or permitted. What will happen to rural people in areas where there is no other way to get around other than walk? Not very practical. It’s not likely that either the infrastructure for EVs or the infrastructure for self-driving cars will ever be installed in the vast and mostly empty reaches of rural America.
Those of us who live and work out here in rural America can’t just walk to the corner store for a loaf of bread or a jug of milk. To cut us off from reliable transportation will amount to a death sentence for a lot of rural Americans – a long and painful death.
– Gary B.
Are EVs the death of rural America? Or are they a great way to get rid of nincompoop drivers? Let us know at feedback@legacyresearch.com.
Until tomorrow…
Chris Lowe
December 17, 2018
Lisbon, Portugal