"This is the greatest wealth destruction I've seen by a President." - Cramer
Posted on 03/03/2009 5:09:20 PM PST by An Old Man
John Maynard Keynes is one of the most influential and controversial economists in history. He warned of the huge burden war reparations placed on Germany and its allies after WW I. He played an integral role in establishing the post-WW II financial world. His economic theories established the impetus for governments to spend like mad during downturns. He made, lost, and made back a massive fortune in the stock market. He counted Pablo Picasso and Virginia Wolf as friends.
He's done a lot. His impact on the world is extensive. But today we'll look at one of his truly lasting legacies. And the invaluable lesson it teaches us about investing. It's something so many investors fail to ever learn.
You see, Keynes was prone to change his mind. He was often openly accused of being inconsistent. Had he ever ran for political office, he surely would have been called a “flip-flopper.”
One day he was approached about his repeated inconsistencies. His simple response was, “When the facts change, I change my mind. What do you do, sir?”
The Facts are Changing
It's a bit of simple wisdom most investors so often forget. An investor who refuses to change when the facts change will lose out big. Just think of anyone you know who rode oil stocks all the way down to current levels. The were citing peak oil theory or the $60 per barrel cost of production of the 85 th millionth barrel per day all the way down. Or agriculture sector stocks. Or shares in pretty much any sector - now that I think about it.
When the facts change, you've got to change with them.
Right now, the facts are changing – fast.
Now, at the Prosperity Dispatch , we've been pretty much spot on when it comes to oil over the past few months. With the exception of OPEC managing to stick together (which will last over the short-term, but has never held out over long periods of low oil prices) we've watched from the sidelines as oil prices plummeted and oil stocks got crushed.
We've focused on both the supply and demand side of the equation. Which, when taken in tandem, still paints a pretty ugly picture for oil over the short-term. The state of the U.S. economy and mounting problems in emerging markets, isn't going to spark a quick rebound in oil demand. And swelling oil supplies sitting round in tankers will be there to be sold into any rally in oil prices.
Those are were the facts.
Change Oil Execs Don't Want to Believe In
President Obama's budget proposal is changing everything. We've already been over some of the changes coming to the healthcare sector and the impact on stocks in the sector (medical insurer Humana (NYSE:HUM) is down 30% since the healthcare system changes were announced).
Now “Change we can believe in” is heading for the energy industry.
It's not an upfront tax though. That would be too simple and may sound unfair. Even the most ardent tree hugger might consider forcing the oil industry to pay higher tax rates as excessive. That's why it's all in the form of increased fees and accounting rules changes.
Included among the proposals to squeeze $30 billion out of the oil industry are:
There are five or six more which will have a significant impact on the domestic oil industry. These changes will each have price tags of a few hundred million dollars for oil companies. When added all up, the eventual cost is around $30 billion.
The impact of them will be much greater than that though. They will help make some oil projects less economical. They'll reduce oil companies' available cash to invest. They're going to slow down an oil industry which has already ground to a halt.
Now, I'm not about to set up some sob story for the oil companies. They're coming off record years for profitability and cash flows. And most of them have piles of cash built up. The important thing here is we're starting to see how alternative energy is going to become economical once again.
It's genius!
But wait, won't an electorate be frustrated when energy costs soar? Heads in Washington will certainly roll when gasoline is $4 at the pump and monthly electric bills are two or three times higher, right?
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Read the rest of the article to find out what the author has to say.
I bet you are really happy you voted for this socialist SOB. Everything is going to change!
The reason for this insanity is supposedly global warming.
The truth is Marxism and control via poverty.
He would love to see that.
they hope. they want $4 a gallon.
I guess that’d be good for the economy?
Well, I didn’t vote for this Socialist (Marxist?)SOB, but I do have to put up with his change unless, or until, the voters wise up. Or could it be possible that, like his cousin over in Africa who is now forced co-president due to his “followers” fomenting a coup, we may either never have another election or else never have another ostensibly “fair” election in this country? Just askin’.
It would make sense looking at his policy ideas.
You know, damn suffer the children and grandkids that have to pay for everything......
Oh yeah......
Easily. Just wait until his energy policy is invoked.
Whether or not oil goes to $300 or not under Obama depends on whether it is decided to really inflate the economy. Keynesian theory sees inflation as a point of positivity for the economy- and the dems are likely to try it to some degree.
But as far as $300 in 2009 dollars,-barring some kind of major international supply problem- I don’t think its very likely at all. The economy isn’t growing, and prices in real terms are likely to be fairly stable.
Obama isn’t asking ‘Could I?’. Obama is asking ‘How Can I?’
Of course He wants us to have oil too expensive to buy. He said it himself in 2007. Guess it was one of those ‘too much truth’ moments when he admitted that $4+ gallon gas was helpful to getting us off oil. He would rather made Iran rich than see Americans happily driving the roads.
But it’s for our own good, don’tcha know....
Not at all. It will actually increase their available cash to invest in international sources, such as the Tar Sands of Alberta.
OPEC has cut all they can or will and the world is still oversupplied with oil... I think the RATS will implement this backdoor taxation on oil knowing that prices cannot be pushed up thereby “punishing” the oil companies bottom line... when and if oil consumption increases and prices rise they will rise much faster than in the past and chances are that “O” will sieze upon that to nationalize the oil industry with class warfare rhetoric.
As for inflation I’m seeing it in food right now although I keep hearing that we are supposed to be deflating in general.
What happened to the world economy at 147.00 a barrel?
Why wasn’t it sustained or able to rise?
I watched a webcast today by Thomas Friedman ("Hot, Flat and Crowded") -- and yes, you are exactly correct. He actually imagines a government, a political entity, making critical economic decisions to make them spot on, time after time.
...That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.
Not only could you get arrested, but if you do your talking here, you can get banned!
If you should ever get arrested, without a buddy to watch your back, and get you unarrested, some would call that poor planning.
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