Oil below $70. Who Saw This Coming?

The price of oil dropped over 6% today and is now sitting just below $70 per barrel. This is NOT the direction most investors thought oil was supposed to move. Remember 2008 when oil was over $140 per barrel

This is another great example of how unpredictable any investment price can be, especially commodities like oil and gold. I wrote about the unpredictable ride of oil prices some time ago. Remember what people were saying back in 2008 when oil went above $140 per barrel? Remember how many “experts” predicted it would keep going to $200 or even $400? Some even hypothesized this was the beginning of the end of civilization; that energy scarcity would cause civilization to drop into a permanent economic rut not seen since the start of the industrial revolution. And then there were the economists who were sure the high price of commodities was due to a pending crash in the dollar, which would be accompanied by high inflation.

Doesn’t it all sound silly now? And it is only 6 years later.

This is a wonderful reminder of one of the top investment principles we employ at Foster Wealth, Inc. That is, what seems like a logical investment narrative at the present moment may not seem so smart down the road.

Interestingly, sometimes the best investment ideas often end up being what no one was talking about a few years in the past. Remember back in 2008 when everyone was going on and on about oil, gold, emerging markets, pending hyperinflation, crashes in the dollar — all of that stuff. Who out there was saying the best investments over the next few years might just be plain-vanilla US stocks, such as the same stocks you might find in the S&P 500? Your regular large company US stocks got very little attention back in 2008 to 2010, but they have done great over the last 7 years – much better than almost any other asset class, and certainly much better than owning oil or gold, which have come down in the area of 40% to 50% since their highs.

But don’t pile all your money into regular US stocks now. The “narrative” has already shifted, and now US stocks and the S&P 500 are seeming like a very “logical” and “sensible” places to be. A good investment portfolio owns thousands of stocks (and probably some bonds) from all over the world, and it can be tediously boring sometimes, but it has historically been the best bet to produce actual results, and we believe portfolios like this remain the best bet for positive results in the future.

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