In today’s Money Morning…you should never try and ‘vote’ with your investments…consequences of consequences…the investment theme of the next decade…and more…
There were some strong words about Australia’s ‘gas-led’ recovery aired in the paper yesterday.
Mr Turnbull said the following:
‘Gas has a role and would have a role for quite a long time but it’s going to be a diminishing one…There are people who are basically rent-seekers who want to get the federal government to pay for infrastructure, and the theory is that is how you’ll make gas competitive…Bottom line, it just doesn’t stack up economically.’
Now, I won’t get weighed down by an ideological debate here.
That’s not what we’re about.
And regardless of what you think about ScoMo or Turnbull, the point is that what really matters to your wealth has little to do with political bickering.
Sure, politics and markets will always collide — sometimes in a profitable way for investors.
But you should never try and ‘vote’ with your investments.
The trick is a psychological one — forget trying to invest in what you think should happen and invest in what will happen.
So, I’m going to go out on a limb here, and say Turnbull is kind of right.
Not because of various moral arguments around meeting our climate commitments, but because from an investment standpoint, the ‘gas-led’ recovery will be a short-lived event for markets.
In the grand scheme of history, that is.
Consequences of consequences
The other big news this morning, was the following (from the AFR):
‘The federal government has approved Santos’ Narrabri Gas project.
‘“Santos welcomes Federal Environment Minister Sussan Ley’s approval of the Narrabri Gas Project and will now embark on a 12-18 month appraisal program ahead of a Final Investment Decision for the next phase of project development,” the company said.
‘Conditions on the approval did not extend beyond those included with the NSW government sign-off, Santos said.
‘The coal seam gas project includes plans for 850 wells to be drilled across about 95,000 hectares in NSW’s Gunnedah basin.
‘Other listed companies in the sector have been eyeing approvals for the unconventional gas project.’
A large step forward for Santos Ltd [ASX:STO].
But in terms of the broader market, this will be a tiny blip on the radar.
In this case I’m talking about what comes after gas.
Specifically, the consequences of consequences.
The first thing that happened was the pandemic taking out a big chunk of our economy.
The next thing that happened was a federal government-led plan to pour money into gas infrastructure.
The consequence of this consequence, or ‘second-order effect’, will reverberate throughout the market.
And I’ve got my eyes squarely on a number of ASX-listed resource stocks.
Here’s another way to think about what investments to consider after gas
There was a 19th century German philosopher called Hegel who was a student of history.
He said of it (and this is an absolute gem of a quote):
‘We learn from history that we do not learn from history.’
He also proposed a sort of three-stage explanation for the way history works. And I think it’s highly relevant to the gas debate and your investment options.
Suggestion: Don’t read Hegel!
So, I’ll keep it simple.
An initial event or thesis is followed by an antithesis and then synthesis.
If the Obama presidency was the thesis, then the Trump presidency was the antithesis, and the Biden presidency is the synthesis.
A large step in one direction, followed by a rejection and then a coming together.
With the gas question it goes as follows:
1. Thesis — gas-led recovery
2. Antithesis — rejection and push towards renewables
3. Synthesis — ASX-listed resource stocks!
The last piece of the puzzle here is what Australia has in its fertile soil.
The fact is, that in order to electrify and de-carbonise Australia we will need to dig an immense quantity of resources up.
Not just for ourselves, but the rest of the world as well.
There are the obvious ones like lithium, of course, but there are also the less obvious ones like cobalt, copper, nickel, and rare earths.
For me, this is the investment theme of the next decade.
And the forward-thinking investor will be looking to capitalise on it.
For Money Morning
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