February 2015 Market Commentary

We are living in very volatile times, and this writing will illuminate why we possess such resolute conviction in how we are managing assets. History plays a major role in our decision making. We are far less worried about the 24 hour News Alert Emergency of the moment. To illustrate our thinking, we are borrowing a selected piece from The Copper Handbook by Horace Stevens in the early twentieth century:  

“There will be seasons when demand will follow so closely upon the heels of supply that prices will go skyward, and the fool will say in his heart that the market must forever advance. There will also be periods when the supply will far exceed demand, and the faint of heart will say that production is overdone, and never more can be profitable, but in the aggregate the great law of averages, immutable as the law of gravitation, will give to the world everything for its imperative requirements, at prices not prohibitory to the consumer, yet sufficiently high to provide for the well-managed companies’ profits beyond the dreams of avarice.”

… Horace Stevens, “Copper Handbook” 1903

Of course his book talked specifically about copper, but we believe this to be true of many other markets as well.

Fast forward to our current day, and think about the oil and natural gas markets. Saudi Prince Alwaleed bin Talal told USA Today on January 11, 2015 that oil will not see $100 per barrel again! While according to OPEC’s Secretary-General, Abdulla al-Badri, oil prices could surpass $200 per barrel without sufficient industry investment. Oil prices have run from over $100/bbl. down to as low as slightly less than $50 per barrel within 5 months.  Natural gas prices have moved as sharply in a lower direction over the same time frame. This type of radical movement in a commodity price “has” an effect; however, we believe it is “only” an effect not a long term trend. This same erratic move has happened over the years in technology prices, real estate, and nearly every asset class that one can imagine. We think that the recent volatility in energy prices is overdone. You cannot dismiss the need for oil in a world of 7 billion people who need these resources. There is not enough alternative energy infrastructure ready to handle the world’s demand. For those who argue that GDP around the world is dropping, I would only modestly agree. It may be dropping from an imbalance in global trade in terms of manufacturing that may be evolving with America as the winner via Natural Gas and Oil.

A.G. Campbell Advisory’s investment philosophy is now and ever shall be a strategy of staying the course and buying the dips. Our clients have been rewarded by sticking to this discipline. Our advice to our clients is “turn off CNBC, stay on plan, and add money when you feel the most fear.” Above all, let benchmarks be other people’s gage. We will have seasons of greatness and prosperity which may or may not be in tune with the market. Like our friend, Horace Stevens, we feel that these Wall Street imposed standards are part of “the fool’s game.”

-Alexander (Zandy) G. Campbell, III

Mark Scott

A.G. Campbell Advisory, LLC, 1340 Smith Avenue, Suite 200, Baltimore, MD 21209