A Curious Question...

A curious question to start today’s issue…

A few readers have written to ask if the editors, here at Agora Financial, follow any particular, top-down “script” from the “front office.” Stated another way, do we “coordinate” our ideas?

I take it to mean is there some sort of daily or weekly Agora Financial “talking point” note? Or do we follow a centrally-managed party line? That is, if, say, I’m discussing oil or gold or copper or such, is my overall theme designed to dovetail with what other editors are discussing?

Easy answer. No. We collectively don’t follow any script or party line. With Agora Financial newsletters, you receive the benefit of distributed thinking. Every editor, and support team, has his/her own way of viewing things, and fulfilling our respective angles of a paid-up subscription.

In my writing, you get my take on energy and mineral investment ideas, and whatever else I think is pertinent. My job is to stick to that “hard asset” investment-based theme. The good news is it’s a wide-ranging body of knowledge. I can take ideas and run with them, and I always want to keep it interesting and informative. But at the end of the day, I need to help readers be better investors in the energy and mineral areas.

Let me say a few more words on that point. I certainly like my editorial colleagues. They’re all smart. They’re perceptive. They’re well-traveled. They are great writers. They come up with great ideas. They have different approaches to investing, and I enjoy reading their newsletters.

Sometimes, our collective ideas even tend to converge. That’s not due to guidance from any front office – actually, there’s no real “front office” in the building – but more because we all follow facts, and apply solid logic to innumerable situations. Thus do different minds often come to similar conclusions.

Then again, sometimes editors differ in our assessments. For example, I’ll say something about oil prices, and another editor will say something quite different in his newsletter. Conflict? Not really. Often as not, it’s just two ways of looking at the same information, and working up different future scenarios.

Overall, with the Agora Financial newsletters, readers receive a broad, continuing series of well-reasoned viewpoints, on all manner of investment approaches. As far as predicting the future? We connect the dots we see, as best we can.

More Dots…

Speaking of connecting dots, last week, news was breaking about “Al Qaeda in the Islamic Maghreb,” and the attack on a natural gas operation in Algeria. Apparently, it was blowback from the French incursion into northern Mali, to take on the Islamist fundamentalists who captured that real estate last year.

The morning headline is that numerous Americans, plus Brits, Norwegians and others, are hostages in the Algerian takedown. The Westerners include employees of BP and Statoil. It makes for a couple of points.

First, when we discuss investing in energy and mining companies, it’s easy to get tied up in ideas like cash flow, investment patterns, barrels of oil, tonnes of ore, price-earning ratios, etc. But at root, these companies are made up of people, and often these people are scattered all over the place – some of which places are austere and dangerous. It’s worth keeping that in mind… always.

Second, this Algerian situation is just another part of the ongoing “oil war” scenario that I’ve developed (with readers of Outstanding Investments) over many years. That is, the Middle East-North Africa area (MENA) is a tough place in which to do business, for all manner of reasons. It’s austere and dangerous, with the particular issue of religion-based extremism and strife.

In the past decade, MENA has erupted with wars in Iraq and Afghanistan, the downfall of authoritarian governments in Libya and Egypt, civil war in Syria, revolution in Yemen, more revolution brewing in Jordan, ongoing unrest in Saudi Arabia and Bahrain, constant saber-rattling with Iran, and now the fighting in Mali and Algeria. Oh, and everybody in MENA hates Israel. Other than that? Piece of cake, right?

Thank God for Elsewhere!

I could spend all day discussing how hosed-up things are in MENA. But my point is that the troubles within this region make a strong case for energy investing elsewhere. Thank God for elsewhere! Insha’Allah!

In a fortuitous development of history, North America is experiencing a rebirth of its own fossil fuel energy industry. We can harvest our own hydrocarbon molecules. And this could not have come at a more opportune time. There are vast new investment opportunities here, although it means that entire generations of politicians, academics, media talking heads and such will have to confront the obsolescence of their anti-oil-company, anti-industry prejudices. Long story.

The problems in MENA are also why I still like development of big oil plays away from the trouble, offshore Brazil for example. Indeed, MENA makes me like the offshore sector even more, because it’s just harder for a bunch of revolutionary religious zealots to drive their Toyota “technical” trucks up to a drilling ship that’s 100 miles offshore, moored in 2,000 feet of water.

Oil Prices

Obviously, MENA is a big source of the world’s crude oil – over 40% of daily global production, and way over 60% of the oil that moves in international trade. So what happens in MENA affects global oil pricing.

And what can happen in MENA? Well, things could settle down, and peace could break out, along with serious economic growth. Not likely, but I’m just sayin’… And then, MENA will continue to produce oil, and use more and more of it internally, with less and less available for export, over time.

Or we could see more revolutions and small-, medium- and/or large-scale fighting in one or more parts of MENA. To the extent that it interrupts the production and/or transport of oil, there’s less available for export, over time.

One way or the other, I foresee less net oil coming out of MENA. To the extent oil does sail out in tankers, more and more of it is bound for Asia, not Europe and certainly not the U.S., over the long haul. Here in the West – especially in the U.S. – we need to change our way of thinking about MENA. Not a moment too soon, some might say.

There’s more dots to connect, including an interesting turn in the gold market. But I’ll save that for tomorrow. Stay tuned.

Best wishes…
Byron W. King

Original article posted on Daily Resource Hunter 

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