Being right is easy.
It’s convincing others you’re right that’s hard. People love their convictions.
But if you look at data objectively, determining future outcomes — and profiting from them — becomes quite easy.
This article is actually about oil, but take the analysis of the recent election as an example…
One analyst named Nate Silver has turned punditry on its head, correctly predicting — without political bias — the electoral outcome in all 50 states… and the entire time, he was deriding the talking heads, condemning their “gut feelings.”
While NBC and Fox were talking about the economy and voter ID laws and demographic shifts and minority turnout and Benghazi, Nate was simply saying, “Look at the polling data.”
He created a mathematical model that assigned every single poll a weight based on its historical accuracy.
After tipping Florida slightly in Obama’s advantage on the eve of the election, Silver gave him a 90.9% chance of winning. He said the popular vote would be 50.8% to 48.3%; it came out 50.6% to 47.9%.
He was absolutely correct in his forecast.
But you can see why it was hard to convince people — especially the half of the country that didn’t want an Obama win.
People called him “extremely partisan,” “in the tank,” and “laughable.” After all, the pundits on the left have to call it for their guy, and the pundits on the right have to do the same (and that’s the problem with traditional media… an article for another time).
But Joe Scarborough, host of MSNBC’s Morning Joe, might have the most crow to eat. Here’s what he said a few days before the election, when Silver had Obama with a 73.6% advantage:
Nate Silver says this is a 73.6% chance that the president is going to win? Nobody in that campaign thinks they have a 73% chance — they think they have a 50.1% chance of winning. And you talk to the Romney people, it’s the same thing.
Both sides understand that it is close, and it could go either way. And anybody that thinks that this race is anything but a toss-up right now is such an ideologue, they should be kept away from typewriters, computers, laptops and microphones for the next 10 days, because they’re jokes.
Silver responded by betting him $2,000 his outcome would be correct. The only joke was Joe Scarborough.
Data doesn’t skew. People do.
Letting what you want to happen or what you think should happen get in the way of what is actually going to happen will cost you a lot.
That’s why I had to chuckle earlier this week over the media frenzy that occurred when the International Energy Agency said the U.S. would pass Saudi Arabia to become the world’s largest oil producer…
Seeing the Shift
Here’s how the Wall Street Journal put it:
A shale-oil boom will thrust the U.S. ahead of Saudi Arabia as the world’s largest oil producer by 2020, a radical shift that could profoundly transform not just the world’s energy supplies but also its geopolitics, the IEA said.
In its closely watched annual World Energy Outlook, the IEA… said the global energy map “is being redrawn by the resurgence in oil and gas production in the United States.”
If you’ve been reading this letter, you know we didn’t need the IEA to tell us this.
The data has been saying this would be the case for more than half a decade. All you had to do was look at it.
We did — back in 2006.
Our first mention of a shale boom in the United States was in May of that year:
It’s not uncommon to hear about coal-bed methane (CBM) from the talking heads in the mainstream financial media.
But what they don’t seem to know, or simply don’t care to investigate, is that there’s more producible unconventional gas than just CBM. And this is exactly what I want to talk with you today about… another source of unconventional gas.
It’s called shale gas. And today shale gas is at the stage where CBM was five years ago: No one is talking about it.
But that’s not going to last very long.
Estimates for North American shale gas are as high as 1,000 trillion cubic feet of in place resources!
Bottom line: Shale gas is going to be huge.
I can foresee this becoming another longball home run for us.
And a longball home run it was.
We’ve been picking off winning stocks as a result of this shale boom for the past six and a half years. Tens of thousands of readers like you have netted literally hundreds of double- and triple-digit wins as a result…
All they had to do was accept what the data said without letting their fears or ideology get in the way.
Indeed, it’s easy to be right. It’s convincing others you’re right that’s hard.
No matter how excited the media get that we’re now “officially” going to pass Saudi Arabian oil production… the fact of the matter is it’s old news — useless for investment purposes.
You have to be ahead of the story to make money.
And the next story will be how, exactly, we’re going to use all that new oil and gas.
What we did in 2006 for the shale boom, we’re now doing for the effects of the shale boom…
Call it like you see it,
Nick Hodge
@nickchodge on TwitterNick is the founder and president of the Outsider Club, and the investment director of the thousands-strong stock advisories, Early Advantage and Wall Street’s Underground Profits. He also heads Nick’s Notebook, a private placement and alert service that has raised tens of millions of dollars of investment capital for resource, energy, cannabis, and medical technology companies. Co-author of two best-selling investment books, including Energy Investing for Dummies, his insights have been shared on news programs and in magazines and newspapers around the world. For more on Nick, take a look at his editor’s page.
