Blog : North Korea Collapse, Oil, India, China

by Peter Leeds on October 14th, 2014

Kim Jung-Un= I'm not sure when oil will find a bottom in price, but it will.  This situation has created a once-in-a-lifetime set-up, whereby oil prices are highly likely to increase from here.  There could potentially be further downside, but long term crude prices should recover strongly.

After all, China is sucking in almost 7 million barrels a day (and increasing), while India's demand is growing even faster percentage wise.  If you don't think oil will reach zero, then a long term time horizon makes the commodity a compelling investment.

Consider that, unlike a company, a commodity can not be derailed by a dishonest employee, or alcoholic CEO, or bad business decision.  Oil, gold, corn, platinum, soy beans, and other commodities will always have value.  They also avoid company-specific risk.  The lower in price they fall, the more probable upside will be experienced.

Ideally oil will fall to 1 cent per barrel (hypothetically, of course).  Then I'll buy all of it, and watch it soar.  The lower the prices, the greater the demand and use, and the subsequent price increase.

= Some oil production wells are beginning to shut down or considering sitting idle at these levels.  This will result in decreased supply, and eventually prices will recover.

This applies to crude oil, but in terms of oil companies and stocks, their outlook would depend on a case by case basis.

= Reports are that Kim Jong-un has 're-emerged' after falling out of view for the last 40 days.  Why does this matter?  Because, if he is in fact dying, or unable to rule, the control of one of the world's largest standing armies falls to his little sister, Kim Yo-jong.  Every year, over 400,000 people in North Korea reach military age.

There are those within North Korea who have now put up with 3 generations of the Il-sung family, and may use the opportunity to unleash a power struggle.  Unlikely, but important to keep an eye on.  

Besides this, it is typically the grandchildren who bankrupt the company their grandfather started, just as it likely will be the grandkids (Jong-un and Yo-jong) who plunge North Korea into the waiting arms and influence of China.

And that will matter, in terms of South Pacific influence with China, Japan, and India.

= A few of my unfairly beleaguered stocks finally sprang back to life today.  These are among my large-cap holdings, and not at all related to the penny stocks I personally hold, or which we profile in the Peter Leeds newsletter.  

For example, stocks like DE jumped up $3, and FDML spiked a nice 9%.  Hopefully these stocks keep rolling!

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