Sunday, April 01, 2007

The One Minute Peak Oil Investor.

Because the markets are my main hobby, in my off-blog life as a civilian I often wind up talking to people about stocks, investments, and energy. And although the concept of 'peak oil' has now gotten fairly widespread coverage, I still find many people aren't familiar with the concept. I'm not going to try to explain it in this post [I believe the most easily read book that explains the concept well is 'Hubbert's Peak: The Impending World Oil Shortage' by Kenneth Deffeyes].

In terms specifically of investments, many of the people I talk to also seem to be carrying a lot of cash (an outgrowth of their bad experiences in the bear market of 2000-2002). When I bring up the topic of how much energy people have in their portfolios, most don't know, or assume they have an average range (probably a reasonable assumption). Sometimes I get around to suggesting an energy stock or two that people might want to take a look at, and the usual reaction is fairly unenthusiastic. Energy just does not seem very sexy to most folks, I guess, certainly not as sexy as a nice tech play. Some people also say basically, "I just don't have the money, and don't want to sell what I have to make room."

Ok, understood, but given the world that we have today, with questions about long term energy supplies (both in terms of location and quantity), emerging markets and their demands on commodities, inflation, and a potentially declining dollar, I think most people should try to be gaining exposure to energy over time.

So here is my answer to this:

I believe an appealing way to gain additional exposure to energy in an inexpensive, low risk way is to use the Automatic Asset Builder program (essentially a dollar cost averaging program - invest a fixed amount every month to buy more on dips, less on spikes) at T. Rowe Price into their New Era Fund, which can be funded with as little as $50 a month. The New Era fund is focused around natural resources and has a healthy serving of energy. The manager (Charles Ober) amusingly is not a peak oil believer, nonetheless, his fund charter forces him to stay heavily invested in natural resources. The fund has returned about 30% per year over the past 3 years, so it's done a reasonable job of capturing the upside. If you take the time to read the article below, you'll learn also Mr. Ober is a believer in wind energy and is making investments in the sector. Oil Boom Runs Out of Gas.

T. Rowe Price: New Era Fund