Last year, Australian Wealth Gameplan editor, Dan Denning suggested where you should have your assets to prepare for “complete financial collapse”. He provided the following handy chart…
Dan’s advice was to move into assets that had real value… assets you could use to sustain life and trade. The break-up was partly tongue in cheek… but the idea behind it was not.
The one problem is that it’s almost impossible to know when the collapse will happen.
Will it be this year? Or next year? Or will it be in 30 years…
That’s why even though you may have a big picture, macro-economic view on the state of the economy, it’s still important to think about the small things. And that means earning a living and building your wealth through the right investments… regardless of when the collapse happens.
Remember, despite the poor state of the economy, businesses and ideas still carry on. Business owners and managers still look to make profits… entrepreneurs still think of new ideas and take risks… and, share prices can still go up.
It was this kind of thinking that got Dan interested in the shale gas industry. And in particular, three stocks he backed last year to benefit from this booming industry.
If you’re not familiar with shale gas, in simple terms it’s gas that’s trapped in deep rock formations. It’s different to conventional gas. With conventional gas, the gas forms in porous rocks and can be easily “sucked out” by drilling into the rock.
But with shale gas, the rocks aren’t porous. They need to be cracked apart (fractured) to allow the gas to escape. Only then can it be “sucked out” through the well.
It’s this kind of innovation that provides benefits to shale gas investors (such as the readers who invested in Dan’s recent stock tips) and to consumers. As this report from Bloomberg notes:
“A shale-driven glut of natural gas has cut electricity prices for the U.S. power industry by 50% and reduced investment in costlier sources of energy.”
At some point you’ll see a floor under the gas price. After all, with all the money spent on exploring and producing the stuff, gas producers aren’t going to give it away for free.
That’s what makes taking a punt on natural gas (and especially unconventional natural gas) a good bet right now. The best time to buy an asset that’s about to leap in demand is when prices are low. Compare that to oil which is still at USD$100.
The longer things stay this way and with more big gas discoveries, there’s a big chance natural gas will be the energy source to replace oil. And when that happens you can expect a boost to the natural gas price and big rewards for the companies and investors who take a punt while the price is low.
P.S. We’ve written about shale gas for some time. But you’re mistaken if you think it’s too late to join in the boom, because it’s only now starting to hit the mainstream. As a report in today’s the Age proves: “Australian shale assets ‘next big thing’ for investors”.
The report notes, “While shale assets in Texas sold at $US25,000 an acre this year and a holding in Ohio and Pennsylvania changed hands at about $US15,000 last month, shale properties owned by Australia’s Beach Energy can be bought for $US406 per acre…”
Could Aussie shale assets increase 6,057% to the same price as Texas shale assets? Why not? To find out which shale stocks Dan Denning has picked to benefit from the shale gas boom, click here for a no-obligation trial to Australian Wealth Gamplan…
Powered By DT Author Box
Written by Kris Sayce
Kris Sayce is Editor in Chief of Australia’s biggest circulation daily financial email — Money Morning. (You can subscribe to Money Morning for free here).
Kris is also editor of Australian Small-Cap Investigator, his small-cap stock research service, where he provides detailed analysis on some the brightest, smallest listed companies on the ASX.
If you’re already a subscriber to these publications, or want to follow his financial world view more closely, then we recommend you join Kris on Google+. It’s where he shares investment insight, commentary and ideas that he can’t always fit into his regular Money Morning essays.