‘You don’t make money when you sell something. You make money when you buy.‘ Keynote speaker Byron King heard those words from a man named Jim Haber many years ago.
Jim Haber gave Byron King his first welding job, straight out of college.
So how did Byron go from being a welder to a keynote speaker at an investment conference? There’s not enough time to go through his history today. But that quote he shared with us on Tuesday just proves that good money advice doesn’t always come from the finance sector.
So how did he kick off his talk? His topic was preserving wealth while Rome burns. And by that, he means the financial system. He started off by focusing on the US economy.
The financial system around us has been showing signs of melting down since the market crashed in 2008. Yet the thing hasn’t fallen over.
Which led King to ask the audience, ‘Can you smell the smoke?‘
That’s the problem. The financial system isn’t burning yet, but the smoke is starting to fill the air, as Byron explained.
He started with Detroit.
In his words, ‘Things are about as bad as it gets. Detroit is a symbol of lots of things that are wrong with America.‘ Like the high unemployment, or even more frightening, the high youth unemployment.
However, a disproportional number of unemployed are young black Americans and the Hispanic population. Byron says the numbers on this are scary. And he reckons very few in the industry understand the implications of this.
He reckons there is a structural shift in the economic climate in the US. And that’s based on two parts. There’s a shift in attitudes to employment happening in America. He thinks the young kids coming up through the ranks have less engagement with the unions than ever before. And this lower unionised work force are likely to have better employment conditions in the long term.
Also, he noted how the fracking revolution is changing the US economy for the better.
Oil production in the US was on the decline until the mid-2000s. But hydraulic fracking is reviving parts of the American economy. The fracking industry is an example of the free market at work.
The technology to extract the oil this way was financially feasible. And in spite of local governments working against fracking, the industry thrived.
A flow on effect of the fracking industry has been the migration of steel producers shifting to Texas. And why wouldn’t they? Energy is cheap, and labour is available.
And this brings King to a key point as he challenged the audience: What’s wrong with you Australia?
King can’t understand that with all our resources: iron ore, natural gas and coal, why we dig it out, ship it to other countries and let them process the ore into steel, using the coal and gas to power the process.
‘Australia ought to be a redeveloping country. I’m just saying; it’s your country, you do what you want. But you’ve got the iron ore, you’ve got the gas. Come on, get with it!‘ said King. The crowd laughed and appeared to agree.
He said it doesn’t make sense that Australia exports iron ore and coal to China, when it could be turned into steel here and exported as a ‘value added’ product. Byron said the argument that Aussie labour is too expensive doesn’t stack up to reality.
Why? His point was that there is very little human capital required in modern steel production. Most of it is automated. The theory could be applied to the coal and gas industries. We could set up profitable manufacturing for both commodities. Sure they’d need a large capital injection to get going, but the long term labour costs would be minimal with an investment in robotics.
As King reasons, America’s shift into fracking and refining oil is one of the few things that isn’t wrong with the economy.
As I mentioned earlier, Jim Haber, his first employer, gave him his first piece of investing advice. And on the basis of that, King said he had some ‘humble’ investing ideas to share with the crowd.
Look for companies on a roll. A momentum idea; technology stocks are a good example of this right now.
Also, there’s nothing like picking up something that Wall Street hates. There are plenty of companies in the junior resource sector that the market really hates today. You just have to be prepared to take a risk.
Find out how to catch Byron King’s presentation, some specific recommendations he made, and more here.
More from the final day of World War D tomorrow.
Shae Smith+
Roving Reporter for Money Morning at World War D