It’s classic Washington accounting.
They show off big numbers and projections, and promise us that spending a fortune today will somehow save us money in the future.
But the problem is… Washington always underestimates the actual cost to the American taxpayer.
And it’s happening again with 2022’s “Inflation Reduction Act.”
In August 2022, President Biden signed the 725-page act into law.
It was the most significant action Congress had taken on clean energy and climate change.
Using what The Wall Street Journal refers to as “accounting gimmicks,” the Congressional Budget Office estimated this bill would only cost Americans $391 billion.
In reality, it’s likely to cost about three times as much — or $1.2 trillion.
And that’s according to a recent evaluation from Goldman Sachs.
That means this new law could cost you and me tens or even hundreds of billions more than the Congressional Budget Office (CBO) estimated over the next decade.
The CBO lowballed on more than a few forecasts.
Because in reality, we’re going to be spending…
- $379 billion MORE for electric vehicles (EVs).
- $156 billion MORE for green energy manufacturing.
- $82 billion MORE for renewable electricity production.
Over the next decade, this program will effectively be 3X or $1.2 trillion MORE than Washington initially voted into law.
But while green energy will get a boost from the IRA, oil and gas companies will be spending less … and that’s a huge long-term problem.
Doubling Down on Fossil Fuels
President Biden told the American people how green energy is the way of the future. And he shouted from the rooftops that fossil fuels were on the way out.
But the bottom line is — President Biden KNOWS we can’t do without fossil fuel.
In an unscripted moment during his State of the Union Address, he admitted that we’re still going to need oil and gas “for at least another decade … and beyond that.”
The Energy Information Administration goes even further, stating that petroleum will still be our largest energy source by the year 2050.
And while Washington flip flops on the death of fossil fuel, some of the world’s most successful investors are betting that oil and gas will be heading higher.
The Smart Money Is In Oil and Gas
While Washington spent 2022 hawking its green energy agenda, Warren Buffett was busy buying hundreds of millions of shares in two major oil companies.
He’s invested a total of $40 billion in Chevron and Occidental Petroleum. One of the biggest investments he’s made in years.
In fact, Buffett recently bought an additional 3.7 million shares bringing his ownership to a 23.5% stake.
Legendary investors like Carl Ichan … David Tepper … Ray Dalio … have also been investing in oil.
You have to ask yourself — what do all these billionaires know that Washington doesn’t?
Here’s the Real Talk….
I believe oil is in a multiyear, perhaps even a multidecade bull market.
China is reopening its economy after three years of lockdown.
India is on the rise and is the fastest-growing country on Earth.
And President Biden is walking back on his promise to kill the fossil fuel industry — forcing major projects through in California, Alaska and offshore Texas.
Meanwhile, OPEC is cutting its production by 2 million barrels per day.
And after years of political headwinds, there’s no way oil companies in the U.S. and Europe can ramp up production fast enough to keep up with demand.
If you, like me, think there’s a chance oil could start going a lot higher very soon…
And you realize this is a great LONG-term investment that can pay you for years to come…
Then I invite you to join me TODAY for a special presentation I’m holding called the “10X Oil Boom.”
I’m going to show you how oil has already gone up 1,000% TWICE in the last 50 years — both over decade-long spans — and why I think we could be in the middle of another one of these decade-long runs.
The presentation starts in just a couple of hours — 4 p.m., ET. But I wanted to give my Banyan Edge readers one last chance to sign up.
Just click here to put your name in and I’ll see you soon.
Regards,
Founder, Alpha Investor
$3,000 Down the Drain…
The real estate market is hard — as a buyer, and as an investor.
I just got a $3,000 bill from an electrician.
And amazingly, I was happy to pay it. While I’m sure the guy is robbing me blind, the first guy I called quoted me close to $7,000.
What’s wrong with my electrical system?
Your guess is as good as mine. I’ve lived in my house for 11 years and noticed that the lights occasionally flicker. I never really thought much about it. The house was built in the 1950s, and I just expect a degree of weirdness in an older home.
But now that I rent out the house, my tenant is hysterical — concerned that it’s going to burn down. And so, I find myself paying $3,000 to fix a problem I was only vaguely aware I had.
The fence is also going to need to be replaced soon. It wasn’t in great shape when I bought the house, but I figured it was a simple fix: a couple of hours with a pressure washer to clean it up, and a hammer to tighten down a few loose planks.
And it did … but that was now 11 years ago. Upgrading the fence to the current standards of the neighborhood will cost me another $20,000.
The air conditioning?
It was new when I bought the place. And I can probably squeeze another five years out of it. More if I’m lucky. But that won’t last forever either.
And the plumbing?
I managed to avoid clogging a toilet for the entire 11 years I lived in the house (mind you, with three young children). Yet it seems I have a plumbing bill to pay every two to three months.
It really is always something.
But I’m still glad I own the property, as I like spreading my bets around. I make my living writing about, and investing in, the markets.
So having a hard asset like a rental house is a nice diversifier. If prices come down enough to make the numbers work, I’d like to buy a few more.
But let me be clear. Even though I have a property management company handle most of the day-to-day drudgery, dealing with all of this is a monumental pain in the rear. If all of my investments were like this, I think I’d just accept a life of poverty and eschew investing forever.
I like — and perhaps need — most of my investments to be stress-free. And I’ve been able to arrange my financial life to make that possible.
Given the current fragile state of the banking system, I’ve been writing about gold a lot lately. I have a stash of gold coins I keep locked away in a safe deposit box. They cause me no grief. They just sit there, available if I need them.
I also have a core portfolio of stocks that, barring some unknown future catastrophe, I plan to hold forever. Dips in the share prices don’t bother me because I know the core businesses well, and I’m comfortable with the risk.
That’s Charles Mizrahi’s strategy as well. I’ve known Charles for years, but I’ve never seen him look worried. Not even once. He doesn’t have to worry because he knows his businesses inside and out.
I’ll be straight with you. I’m not wildly bullish on the overall market right now. I tend to agree with Mike Carr that the recent chaos in the financial sector looks more like a Bear Stearns moment than a Lehman Brothers moment, implying we might still have another shoe to drop.
But I also know that these market dips create fantastic opportunities — like the oil industry. You can potentially pick up good companies at good prices, and make precisely the kinds of investments that help you sleep well at night.
Regards,
