Investing Summary

To read parts 1, 2 and 3 of my investing series click on the respective number.

At the end of the part 3 I mentioned that I was going to follow up the first 3 posts with a follow up summary post to detail what I see the future like and what my personal plans for the future are. After completing those three brain dumps onto you all I think I’ve formulated a decent (or descent, to play on a common Peak Oil term. HA!) strategy for the future.

Objective #1
My first objective is to pay down our family’s debt as rapidly as possible. I’ve already taken the first steps in this direction by selling my entire real estate portfolio, save for one. I have lowered our 401K contributions to the minimum percent necessary to receive the maximized company match and the excess funds will be directed toward debt repayment. I have a debt waterfall structure in place to allow us to focus on the debt most easily paid off first, than it will go in order of highest interest rate until they are paid in full. I imagine this will take a number of years unless I get lucky and win the lottery or something. (Hey, I play occasionally, “You can’t win if you don’t play!”)

Objective #2
Increase immediate savings to the point that we have 6-12 months of immediate living expenses saved. This is a lower priority than debt repayment because the interest earned is less than the interest paid on the debt. I’ll need to ensure that this savings is in a reputable bank that I have a good comfort level will still be operating in the long term. I’ll set these up in a laddered system of 6 month CDs so that each month a CD will expire and can be reinvested at the current interest rates. This will allow me to take advantage of interest rates as they rise. It also ensures that once each month my cash becomes available if I did need quick access to it.

Objective #3
When I’m making a decision about investment positions to hold or purchase the importance of Peak Oil will be prevalent in my decision. I’m going to allocate a larger percentage of our portfolio to international stocks and international mutual funds (401K included) than is normally recommended by most “experts”. I’m also going to maintain our domestic positions in companies with large international exposure. That means mostly large cap stocks will be our domestic holdings. I’m also going to start exploring some emerging market funds for opportunities.

Additionally, some recent information I have gathered has helped me realize that nuclear power and solar power might be able to hold their own in the period just after peak while energy is still readily available, only more expensive than it is now. I’m going to explore utility companies with a large amount of nuclear generation capabilities and also start to delve into solar companies for investment opportunities. My plan is to focus on solar companies that make solar products that are smart products and have more potential for mass productions. Examples of these would be solar ovens and solar water heaters over solar panels, because of the cost to benefit differential for the average consumer.

Objective #4
If I’m so convinced that upon Peak Oil the market will decline than I should just short the market. This is easy to do by purchasing some ETFs and selling them short. (When you short sell something in the market you are betting it will decline rather than “going long” and betting it will rise over time) There are a couple problems with shorting stocks though; 1) If it continues to rise you may have a call by your brokerage to add cash to your account and 2.) We keep our portfolios in Roth IRAs which I’ve been told can’t be used to short sell stocks. On the other hand, some places say that it can be used that way.

I’m going to need to think more about how best to handle the drop I forsee so we can maintain our asset positions without us losing a corresponding amount of worth.

To summarize:

Maintain asset positions in companies with substantial international operations and in internationally focused mutual funds.
Increase cash position to 6-12 months of expenses and then ladder CDs of 6 month terms to increase yields on cash and have cash available.
Apply excess cash to debt repayment to facilitate the removal of monthly obligations and to lower future cash flow needs. Pay back debt in a waterfall scheme starting with the debt with the most easily paid off balance and then proceeding down in order of interest rate.
Determine effective strategies for capturing returns when market descends after Peak Oil is a proven fact. These strategies could be short selling stocks, ETFs or buying puts, or something else I dream up.

I hope this series helped. It might not have been the best investment advice the world has ever seen, but I do hope that it made you think about the future and how something like Peak Oil can affect your current situation in ways you may not have imagined. I hope that you took at least something away from this as you make decisions for the future.

FGLB