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Diary of a Dumb Investor: from oil to America’s decline

Thanks for nothing, most of you – I have little confidence in investing in junior oil shares now. But I have found something I understand.

Diary of a Dumb Investor: from oil to America’s decline

Ha, you had me for a minute! Just for a moment last week, when I wrote about finding a small oil company to invest in, I thought I could rely on Citywire reader pundits to start me on my way.

Not to make my investment decisions for me of course, but for a few wiser heads to suggest a couple of companies that I could stick into Google.

But what started with some useful recommendations soon turned to debate over American English (you do the 'math'), which then morphed into a cross-Atlantic blame game over the BP (BP.L) oil spill, before descending into a discussion about US friendly fire incidents…

Buried among the playground put-downs – presumably underlying this kind of abuse is people’s insecurity about their investments, perhaps seeking ‘confirmation bias’ –  was some sensible (if slightly stinging) advice.

Learning my limits

A couple of thousand years after Lao-tzu and Socrates’ suggestion that wise men recognise the limitations of their knowledge – but no less on the money than the famed philosophers – Sgjhaghsdg said: ‘a key part of being smart is knowing what you know and knowing what you don't know’.

‘If you find the jargon impenetrable (it isn't, you just haven't yet put in the work) then move on. If you find all jargon impenetrable, then use trackers,’ he goes on.

Michael Hellman said: ‘Don’t know enough about the junior oils to pick a no brainer, so I bought the "Junior Oils" Fund, which is not a buy and forget rather a buy and sell, which has worked for me over the years.’

Thank you. Clearly, this is not something I can rush into. I’ll be researching some of the companies suggested to me by readers – Xcite (XELL.L), Bowleven (BLVN.L), Falkland Oil and Gas (FOGL.L) – over the coming weeks.

America down, emerging world up

While I won’t tolerate misguided anti-Americanism, I am willing to take a punt on the decline of the USA (alongside the rest of the indebted, slow-growing Western world) and rise of the relatively debt-free (relatively risk-free?) and faster-growing East.

At the risk of shifting too much of my portfolio into emerging markets – I have two share/equity funds – I am tempted by emerging market debt. Here’s what I’ve learnt…

There are a few ways of doing this, all of them via collective investment funds: you invest in bonds issued by companies in the emerging world, government bonds (aka sovereign debt) issued in US dollars, or government bonds issued in a country’s local currency.

Apparently, as governments get more credibility they start creating more bonds in their own currency. Still, ‘local currency’ debt is a riskier proposition than the US dollar stuff. The latter is a bit of a leveraged punt on the US dollar, to use the lingo. And US dollars are on the rise. Spain – which is increasingly resembling one of the Castells celebrated in the country’s celebrated fiestas – should help here, bringing down the euro and strengthening the dollar.

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5 comments so far. Why not have your say?

derek farman

Jul 23, 2012 at 12:54

I bough the Junior Oils Trust a couple of years ago . Finally had to ditch it . It was losing me too much money !

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Paul J

Jul 23, 2012 at 14:03

I had the same experience. Majors were going up:- Junior Oils down.

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Jul 23, 2012 at 18:31

the clue's in the title - 'junior' oils ie explorers - most will fail. Better to go for major producers.

DI, can I suggest that, in the current environment, you learn how to short rather than trying to pick the few shares that may go up in your timescale. Eg SUK2 or SPXU

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Jul 23, 2012 at 18:51

Stump up some money yourself, and ask your freinds and family for a few million pounds, hire a rig and do it yourself.

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wayne roberts

Jul 29, 2012 at 11:59

I think being called 'dumb' has affected you and now you are trying to prove that you aren't.. making money isn't about being clever, your predecessor was trying to be clever; buying Lloyds, shorting France etc etc, why try and outwit the markets and play with fire? What are you trying to prove? This is like the classic case of why doctors and lawyers aren't successful in the markets - over-thinking things, its not an intelligent pursuit its an action sport.. and the only way you are going to win is by having your own unique edge.. a system to get in and out of trades/investments with a mechanical not emotional response, the time to buy junior oil is when the institutions buy it and they will buy it at the bottom and your task is nothing more than detecting their telltale signals and riding on their coat-tails..

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