Presentation Transcript
Slide1 : Oil & The Future Dr. Stephen Leeb, MegaTrends Fund (MEGAX)
Dr. Stephen Leeb, Ph.D. : Portfolio manager of the MegaTrends Fund (MEGAX)
Author of The Oil Factor: Protect Yourself – AND PROFIT – from the Coming Energy Crisis Dr. Stephen Leeb, Ph.D.
ENERGY AND INVESTING : The urgent message for investors:
Oil prices are on the rise
the uptrend is long term
rising prices will come to dominate the economic and investment outlook.
Oil supplies will become inadequate sooner than is generally understood ENERGY AND INVESTING
CAPACITY LIMITS : Back in early 2002, $30-a-barrel oil was widely viewed as an anomaly
Most anyone with an opinion on energy – from Wall Street analysts to oil industry executives – believed oil prices were in a long-term trading range centered around $20 a barrel
This opinion rested on the assumption that worldwide oil capacity was sufficient to supply the world with all the oil it needed CAPACITY LIMITS
CAPACITY LIMITS : Much of that capacity was in the hands of the Saudis – but Saudi Arabia had always proved a reliable supplier of last resort
The emerging Russian oil miracle: from the late 1990s on, Russian oil production and exports had been rising sharply
By 2004 - burgeoning demand for oil became obvious
CAPACITY LIMITS
AMEX OIL INDEX PRICES : AMEX OIL INDEX PRICES AMEX Oil index, XOI – price weighted index of the leading companies involved in the exploration, production and development of petroleum.
ARE OIL PRICES HEADED HIGHER? : Even if demand were to slow? ARE OIL PRICES HEADED HIGHER?
DEMAND : Lately oil has been in the headlines constantly as prices have reached previously unseen levels
demand will continue to rise
investors should respond
Rapid growth in Asia will be a major reason demand for energy will accelerate DEMAND
ENERGY DEMAND : ENERGY DEMAND
POSSIBILITY INCREASES IN SUPPLY : To the extend that Saudi Arabia and Russia can produce extra oil
inevitable that they will need to consume much of it themselves
Enormous investment in which ironically growth requires energy
POSSIBILITY INCREASES IN SUPPLY
RUSSIA : In the 1990s and early 2000s, Russian GDP dropped by more than 30 percent.
Good thing for the rest of the world
Russian demand for energy fell by 20 percent
If Russian energy consumption had grown by just 2.5 percent a year during the same period
Russian consumption by 2004 would have nearly matched production
leaving almost no oil to import
As energy production within Russia began to climb, so did energy consumption. RUSSIA
SAUDI ARABIA : Internal consumption of oil production has been in a sharp uptrend
Energy-intensive economy
growth has exceeded 4 percent
energy use has grown by 12 percent SAUDI ARABIA
BOTTOM LINE : While oil may be volatile shorter term – Longer term there are simply no scenarios
apart from a massive worldwide recession
As long as growth in oil supplies isn’t keeping pace with growing demand, oil prices will continue to rise
Whether curbing demand or boosting supplies…highly unpleasant scenarios will arise BOTTOM LINE
INVENTORIES : INVENTORIES
ULTIMATE ANSWER : Development of alternative energies
Likeliest to have the most immediate impact on helping us meet our energy needs
Nuclear energy
Wind Energy
Tar Sands
Liquefied natural gas ULTIMATE ANSWER
INVESTING : Heavily in stocks that are suitable for both inflationary and deflationary portfolios
Big players in alternative energies
Wonderful hedges
All-weather stocks that can go in any portfolio INVESTING
RECOMMENDATIONS : Exelon
Entergy
Air Products and Chemical (inflationary portfolio)
Canadian Oil Sands
FPL Group
Of course direct energy plays as well RECOMMENDATIONS
EXELON : Nuclear energy will temporarily fill the gap
Exelon is the nation’s largest nuclear utility
entire fleet is unregulated
Potential expansion and building additional facilities
Could result in double-digit profit growth EXELON
ENTERGY : Nation’s second-largest nuclear utility
Capacity is regulated
More downside protection in the event of a recession and upside exposure to nuclear energy ENTERGY
AIR PRODUCTS AND CHEMICALS : Liquefied natural gas (LNG) has the potential to add the equivalent of about 5 or 6 million barrels a day to the world’s energy supply
Heat exchangers - vital components in converting natural gas into liquefied form
Also produces hydrogen - vital in refining alternative fossil fuels AIR PRODUCTS AND CHEMICALS
CANADIAN TAR SANDS : Nearly 180 million barrels of oil sands reserves - tar sands are the second largest source of fossil fuels in the world
The Catch - difficult and expensive to mine these sands
Still an important energy niche CANADIAN TAR SANDS
FPL : Wind the most promising alternative energy
Best-situated all-weather stock
85% of revenues from being a regulated utility in Florida
staid but steady income
Nation’s Largest wind generator
(General Electric - is the largest integrated wind company) FPL
CONTINUING UPTREND : Turbulent times that lie ahead
What to buy and what to avoid in order to protect yourself and profit
Upside potential for investors is enormous CONTINUING UPTREND
DISCLOSURES : DISCLOSURES Please consider carefully the fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com/adviser or by calling 1-800-873-3639, option 2. Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
Holdings as a percentage of net assets as of 9/30/04:
MegaTrends Fund: Entergy (1.09%), FPL Group (2.05%); General Electric (2.51%).
Although mentioned, none of the following companies were held in the MegaTrends Fund as of 9/30/04: Exelon, Air Products and Chemicals, Canadian Oil Sands.
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