THE PERFECT STORM 93The losses are going to start to roll in, but they’ll come in
slowly. I’m not suggesting that tomorrow morning we’re going
to wake up and find the financial system collapsed. This is the
beginning of a disaster.
■ Here’s How to Protect Yourself
The two most specific ways investors will lose is, first, on the
equity side of their portfolios. To protect yourself, check to see
if you have any second tier or mid-tier drilling and exploration
companies in your portfolio.
Exxon Mobil is not going go bankrupt. They might cut
back their capital expenditures or maybe their earnings will go
down a little bit. But a company the size of Exxon Mobil is not
going away and they’re not going to go bankrupt. In fact, the
largest companies sometimes benefit from situations like this
because it flushes out the competition, gives them more flex-
ibility and they can buy up some of these assets on the cheap.
The fracking sector is more vulnerable than the traditional
oil sector because that technology is a little more expensive. So
much of it is new and was financed with debt. They are a lot of
small, mid sized companies. They are the ones you should look
out for because you could lose on the equity if they go bankrupt.
You also have to look at the bond part of your portfolio and
look to see if you have any debt from these companies. There
are investors who are sick of getting no interest from the bank,
no interest from Treasury bonds or other safe investments.
I like gold, but gold doesn’t pay any dividends or interest. You
have to have a view that it’s a wealth preservation mechanism.
Gold, cash, and Treasury bills pay you nothing.
That means people are chasing yield. Perhaps an investor
says to himself, “Hey, I’m retired, I worked hard all my life, I’ve
got this amount of savings; and I’m counting on five, six or seven
percent out of my portfolio to enjoy a comfortable retirement.”