On The Real Oil Prices Over The Past 150 Years

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Crude oil prices are on a roller-coaster ride this year.Brent Crude was down 1.76% and closed at $45.77 on Friday for November 2016 delivery. A year or two years it seemed prices would never fall under $100 per barrel and forecasters were even  predicting prices may reach $200. Now oil companies are desperately hoping prices to hit $60 and stay above that level.

According to an article by Shawn Driscoll at T.Rowe Price,  real oil prices are considered over $40/bbl (in 2014 dollars) are considered unusual when prices are looked at over the past century.

The real prices of oil over the past 150 years:

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real-oil-pirce-over-150-years

Source: Natural Resources – Uncovering Opportunity in a Secular Commodity Bear Market, Shawn Driscoll at T.Rowe Price

The recent peak reached in 2014 exceeded the levels during the Iran-Iraq War in 1980.

Investment perspective:

Obviously low oil prices are not favorable to oil companies. However the major firms are big enough to weather the downturn. In fact, many have sufficient cushion to pay dividends year after year. Even if profits should further hit, they can finance dividend payout by issuing more debt since rates are lower. So long-term investors can consider adding stocks in the oil and related industries at current prices in a phased manner. Due to the current volatility in the market, it is better to stay away from small and medium companies especially oil and natural exploration firms and producers.

The supermajors of the oil industry are Europe-based BP plc (BP), Royal Dutch Shell plc(RDS-A, RDS-B), Total SA(TOT) and Eni(E) and US-based ExxonMobil (XOM), Chevron (CVX) and ConocoPhillips (COP).

Disclosure: No Positions

Emerging vs. Developed Market Total Returns Since 1987

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Emerging markets have outperformed developed markets this year. As of  Sept 9, the MSCI Emerging Markets Index is up 14.5% while the MSCI World Index is up 2.7% according to an article by investment guru Mark Mobius. The MSCI World index is a proxy for developed markets.

The following chart shows the total return of Emerging vs. Developed Market since 1987:

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emerging-vs-developed-markets-returns-since-1967

Source: Emerging-Market Resilience, Mark Mobius, Franklin Templeton Investments, Sept 15, 2016

In addition to the resilience of emerging markets this year, Mr.Mark  is bullish on the long-term investment case for these markets. Factors like rising purchasing power, favorable demographics, etc. should benefit developing countries.

Related ETFs:

  • iShares MSCI Emerging Markets ETF (EEM)
  • Vanguard FTSE Emerging Markets ETF (VWO)

Disclosure: No Positions

US Obesity Rates By State

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Obesity is a major health epidemic in the US. Billions of dollars are wasted per year in treating all the health issues caused by obesity. However drug firms, hospitals and others profit from treating obesity and related illnesses.

The following chart shows obesity rates by state:

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obesity-ratees-by-us-state

 

†Obese is defined as body mass index (BMI) ≥ 30.0; BMI was calculated from self-reported weight and height (weight [kg]/ height [m²). Respondents reporting weight < 50 pounds or ≥ 650 pounds; height < 3 feet or ≥ 8 feet; or BMI: <12 or ≥ 100 were excluded. Pregnant respondents were also excluded. Washington D.C. falls in the 20 -< 25 category.

Source: Schwab Sector Views: What’s Ailing Health Care? by Brad Sorenson, Charles Schwab

Knowledge is Power: Emerging Markets, Boat Lift, Public Speech Industry Edition

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us-capitol-dome

US Capitol, Washington DC

Meat Consumption Across Select Countries: Chart

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Meat consumption is related to income. People in high income countries tend to eat more more than those in low-income or poor countries. Production of all types of meat costs more than producing agricultural products.

The chart below shows meat consumption across select countries:

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Meat Consumption Across Select Countries

Source: OECD

Since the US ranks second and health issues such as obesity is a major epidemic in the country, probably Americans can reduce their meat consumption levels….