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LEARN TO DRIVE
Energy Proves Prudent
As Investment Instrument
ARNOLD MICHLIN
Special to The Jewish News
T
here is a window of
opportunity, right now
and maybe only for a
short time, to acquire energy
reserves at bargain prices for
the coming crunch: Even
though there is a glut of oil in
the world, we in the U.S. are
now imorting 41 percent (and
more) of our oil supplies.
Remember 1974 when we had
to line up at the gasoline
pumps? We were importing
34 percent of our oil at that
time.
When the price of oil drop-
ped, it did help dampen the
pressure of inflation. Was it
possible that inflation could
be maintained at only a few
percentage points? Maybe
help us be competitive in the
world market for our goods?
Could we really reduce our
continued high balance of
trade deficit? But, here we
are, gasoline back to a dollar,
inflation increasing and no
relief on our foreign trade
deficit, even with a dropping
dollar! What are the answers?
How does one invest prudent-
ly for the future?
We must explore for oil in
the U.S. but, unless we offer
incentives, investors will not
take the risk of finding new
fields, our only hope for
energy self-sufficiency.
The "sleeper" is investing
in natural gas. Yes, there is a
temporary bubble. We do have
more natural gas than we are
consuming. But, our "excess
availability" is shrinking
rapidly since we have curtail-
ed "drilling so drastically.
Remember what Bernard
Baruch said: he "buys straw
hats in the winter time."
There is a window of oppor-
tunity to acquire natural gas
reserves now.
How does one proceed to in-
vest prudently into energy?
Buying oil stocks requires
much extensive and patient
research. Many oil companies
own refineries and distribu-
tion companies which may
not respond to the projected
increases in the prices of gas
or oil. They are subject to the
vagaries of the stock market,
which may have generated
special opportunities recently
when the stock marked "slip-
ped."
Buying energy Master
Limited Partnerships is also
Arnold Michlin is a financial
planner affiliated with Korn,
Womack, Stern and Associates,
Inc., in Southfield.
a potential, but, again,
serious research is required.
You need to know why the
partnerships were rolled up,
what their new financial
strength is, is management in
for the long haul, what do
they know about competing
in the new "bare bones" en-
vironment, do they plan to do
more drilling, on what basis?
There are mutual funds in-
volved in energy. Have they
just bought up bargains or
problems? Are your dollars
going for reserves or offices, or
salaries, or equipment which
may never be used?
Limited partnerships doing
drilling or buying up reserves
may be easier to track down.
But make certain you know
that your financial planner
has the ability to deal with all
of the above aspects in acquir-
ing reserves, that he knows
his business and that he
knows the people, history and
strengths of the general part-
ner in the limited
partnership.
Drilling partnerships are
still available where one can
get a tax write-off against
"any" income. Dealing with a
reputable responsible general
partner who has "excess"
liability insurance, one can,
even late in the year, write off
approximately 75 percent, of
his investment this year. In
this case, make sure your
financial planner has obtain-
ed all the necessary assur-
ances that it can be done and
that you know that you have
qualified and understand the
details completely.
Income funds are those
which purchase existing
reserves which are ascertain-
ed by professional geologists
and petroleum engineers. To-
day oil in the ground may be
purchased for. approximately
$5 per bbl. Make sure you
know the "lifting costs and
the "backend split" before or
after "payout." Get familiar
with all thege terms, compare
one program with another —
do your homework — make
sure your planner has done
his.
Energy is a technical
business, but the rewards
look very promising. Do your
homework. Don't plunge.
Look at the several ways to
go. Visit in person with your
financial planner. Find out
when visiting "dignitaries"
are in town. Insist meeting
with them. Learn the jargon.
Stay with this long-range in-
vestment. One day it may pay
for a wedding, down payment
on a house or business.
851-9684
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Beth Abraham location.
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THE DETROIT JEWISH NEWS
81