It is Obvious

Chris Rick has got altogether too much to say

How I made my first million

Posted by chrisrick13 on March 28, 2015

It is obvious: they’ve stopped making land

Mark Twain gave that as a good reason to invest in land.  A bit of a simplification.  If you bought beach front properties in many places on the east coast of the USA in the 1920s you would still be ‘under-water’.  Not such a bad phrase as many islands in the pacific were once habitable but are now…under water.  So it is for much of Bangladesh and might soon be for large parts of Central London.  Getting it right pays handsomely…as it does with any investment.

I am heavily invested in land as I have two houses.  Not so long ago I bought land off neighbours to add to my garden.  These might yet turn out to be rotten investments as I have not realised the gains.  Not realised the gains from lumps of dirt into ones and zeroes in a bank’s computer.  Perhaps you might understand my caution.  For the moment I would rather sit in my conservatory drinking wine looking at the garden than look at paper copies of the ones and zeroes sent me by the bank.

I have said several times that my family has gone from zero to a total value of over £1m.  Of a late my wife has been the biggest contributor but as my savings removed her debts when we married I have no concerns there!  Of that £1m I will get my hands on little of it though perhaps a bit more of it with the new pension rules.

So 34 years to our first million.  What now?  Time to start on the next one.  Why not?

I am taking profits from shares.  Cash is no bloody good.  Inflation and money-grabbing governments can soon have it.  However for the moment being agile might outweigh the disadvantages of poor returns.  At 0% inflation with poor returns from just about any investment cash does not fall behind at much of a rate.  A few moments ago £3000+ popped through the door from share sales.  I’ll go and waste £5 of that with a coffee on the way to the bank on Monday.

I’m moving some of my index trackers into cash for a short while.  I just want to see what the stock market does over the next 3 months.  Will the market go up 50% and I miss out in a big way?  No chance.  Might it plunge?  A chance.  It is close to May for the saying: sell in May.  Also taking more profits from shares that I actually hold.

It is all small stuff.  Not going to sell a house and going to leave pensions where they are.  That is most of my (our!) wealth.  The small stuff is what really counts though.  The big stuff keeps us alive and we don’t notice.  The small stuff buys the Ferrari and the class-A drugs.

I have sat staring at a huge opportunity for some while now.  Why have I not done anything about it?  It is for the same reason that I only have £1m now!  The opportunity is oil.  Important to note that I think it has the potential for a drop yet.  The price of Brent Crude has fluctuated over the last few days.  That is an amusement in itself.  It is a ‘benchmark’ price but there is b***er all of it left.  Going to need a new benchmark soon.

That is one side of the story.  Invest in oil…they’ve stopped making it.  Not only did they stop making it some long while ago, we have used most of what they did make.  Plenty of sources are in decline a good example being the Brent oilfield.  Shale oil is expensive to extract and there is not much of it.  Plenty of source owners are known to be lying about how much they have.

It took only a small drop in oil demand and the price halved.  Suppose there is a small drop in production.  Saw it last week.  There was not a drop but just fears about the Straits of Hormuz being blocked for oil tankers.  We got 10% on the price of oil in short order.

The oil doom-mongers have predicted oil prices over $200 a barrel with a steady trek upwards.  Reduced oil production will drive to other energy sources not from market forces but simply because there is no choice.  That does not mean oil will get cheaper.  Yet we have just had a drop in price of 50%.  You can view that another way:  there is little between where we are now and a doubling of oil prices.

So I am moving to cash and dripping money into oil (pun intended).  I’ll have some of that at $50 a barrel and still have cash around for $20 a barrel if it gets there.  £2m here we come.

It is obvious: they’ve stopped making land and Sinclair C5s.


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