Escribo a menudo en Quora.com, donde soy el escritor más visto sobre temas financieros, con más de 422,4 millones de visitas en los últimos años.
En las respuestas que figuran a continuación me he centrado en los siguientes temas y cuestiones:
- Is it possible for British pound to fall below US dollar by Brexit?
- Will the oil price go up to $300.00 a barrel, in the next five year time frame?
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Is it possible for British pound to fall below US dollar by Brexit?
This question was asked in 2016. It didn’t happen. The lowest it got to was 1.16, and that was brief.
A sequence of events is much more likely to bring it to parity. We are seeing that now. More people are asking that question now Johnston has gone:
What is those sequence of events? Well:
- Political uncertainty. An election could be called within a year or two, where there could be a coalition government.
- The UK is trying to increase corporation tax by 30%+ (from 19% to 25%) while running a significant deficit. That tax will probably get scrapped, but the tax burden is very high.
- The world economy is struggling. In those moments, the USD tends to increase. We are already seeing the Euro move towards parity.
- Rising interest rates in the United States. If US interest rates increase faster than in the UK, that will probably bring more downward pressure.
- The tough Brexit transition.
The value of the GBP to USD doesn’t matter that much. If the Pound falls against a basket of currencies, that matters more.
All it will do is drive up inflation more, especially as some commodities like oil are priced in USD before rising interest rates and a possible recession bring it down again.
A far bigger issue is the long-term trend of devaluation and interest rates being lower than inflation. The Pound was 2:1 against the USD in 2007.
That is higher than the historical norms of 1:50-1:60, but the sharp fall to 1:20, coupled with very low-interest rates, has devalued savings considerably.
Investing has always had a premium over saving in return for extra volatility, but that gap has increased, despite the blips in asset prices along the way.
If somebody had invested 100,000 Sterling in 2007 and linked it to the global markets, they would now have over $400,000 (332,728 pounds) due to the combination of rising markets, dividends and the weak pound.
That is despite all the market falls in the middle – the 2008 Global Financial Crisis, Covid in 2020, this year etc.
100,000 Pounds in the bank for 15 years would now be worth about 115,000 pounds.
So, parity is possible, but the longer-term trend in the last 15 years is a more significant issue.
Will the oil price go up to $300.00 a barrel, in the next five year time frame?
This question was written five years ago. The answer is no. Oil hasn’t hit $300 a barrel or even half that point.
Nobody can predict the future, though, and we couldn’t have known that in 2017. If two major wars were going on in the Middle East at the same time, the prices could have hit $300.
I will make a larger point though. And that is one of the single biggest mistakes investors make is “doing their own research”, and listening to forecasts.
It is normal for people, especially well-educated ones, to want to be well-informed. The issue is that the media, and some investment banks, make a living out of silly predictions.
Look at predictions for the oil price now. Oil has fallen to under $100 in the last few days. Many banks are predicting $65 by the end of the year:Oil may collapse to $65 by year-end amid concerns of demand-crippling recession: Citigroup* Warning is in stark contrast to JPMorgan Chase where analysts earlier warned global oil prices could reach a ‘stratospheric’ $380 a barrelhttps://www.brecorder.com/news/40184439/oil-may-collapse-to-65-by-year-end-amid-concerns-of-demand-crippling-recession-citigroup
What’s more, if you dig into these banks’ forecasts, you will see the opposite predictions. For instance, JP Morgan has also been pessimistic about oil prices not so long ago, and might just dramatically change their forecasts.
It gets worse when it comes to stocks. Outlandish predictions are made about huge gains, and especially huge losses, every year.
We don’t know the future, and can’t predict it. All we can do is make educated guesses about the information available at our disposal.
Right now, most of my clients and associates who work in oil&gas think we are living in a ’very hurrah’ for the industry.
In other words, there could be high or at least decent prices for a few years before the industry goes into decline in the next decade (or sooner).
Will they be proved right? Who knows, but what I do know is:
- You will never make as much money following forecasts as you will be having a long-term diversified portfolio and just holding steady.
- There isn’t a “growth story” with oil. If you buy an oil ETF, you don’t even get paid dividends or a coupon, unlike oil stocks. It isn’t like a firm that can grow and get bigger. All you are hoping for is that the person coming after you will pay more for the asset than you paid for it, which is speculation. If supply goes up, as it did in 2014 after the discovery of new oil, or demand goes down due to a recession, the price falls, and with no dividend to fall back on.
- Commodities haven’t beaten stock markets long-term. They are just more volatile. The only reason to own them is that they add diversification and are uncorrelated to markets. For instance, this year they are up when markets are down, despite trailing markets for years
- The media largely exists to entertain, not to be accurate. The ‘old news’ – bad former predictions – soon get forgotten – as per Forbes’ quote below
So, I wouldn’t worry about whether oil hits 300 or 30. We can’t predict it, and it is unlikely we can profit from it unless we get lucky.
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Adam es un autor reconocido internacionalmente en temas financieros, con más de 830 millones de respuestas en Quora, un libro muy vendido en Amazon y colaborador de Forbes.
