How to Recognize the Peak of the Market – Week 2

Oil at $75 a Barrel:

You don’t have to be very old to remember all the hysteria about “peak oil”. That bit of hysteria was that the maximum amount of oil in the world had been discovered and was being consumed. Therefore, the oil supply had peaked and the prices were going to skyrocket.

Since that time an enormous amount of oil has been identified, to the point that the world is literally awash to oil today. There is no reason for oil prices to be going up anywhere close to $70 a barrel other than the fact that the oil market is relatively small and easily manipulated.

On Friday, May the 4th, 2018, crude closed at a cost of $74.87 a barrel. This was well above the forecast earlier in 2018 that value of a barrel of oil would peak somewhere around $60. This price is a strong indication of the ability of some to manipulate the price of oil.

The only oil producing country in the world that can produce oil at $60 a barrel profitably is the United States of America. All the rest lose money for each barrel.

All the oil-producing countries other than the United States are losing money because they have too much debt and have obligated themselves to too much socialistic programs for their nationalized oil producing businesses to carry today.

Increased oil costs will impact the cost of every good and service we American consumers purchase. These increased costs will be reflected in increased prices we pay for everything, a nice way of saying that the rate of inflation will increase.

It is critical to remember that land is the source of all wealth. Every product that we humans consume originates with land. Not all tracts of land are equal in quality and portfolio management requires every investor to hold some cash for liquidity. But historically, long term the best investment is land.