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CARRET & COMPANY'S PHIL CARRET
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"If the confrontation in the Persian Gulf does become a full scale war, we shall undoubtedly experience blood, sweat and tears. I confidently expect we shall win and that stock prices will reflect the victory."
"Here's a philosophical question. Is it unpatriotic to hold the shares of companies whose business is made prosperous in a war economy? I do not believe so. It would certainly be wrong to promote a war just to line one's own pockets. Fortunately, there are very few human beings in this world who can promote a war."
"If there is to be a war, however, why bury one's head in the sand? War means economic dislocation, great prosperity for some industries and difficult problems for others. The job of the professional is to pick the winners in the ever confusing kaleidoscope that is the securities market."
I can't find any situation today as sweet as my 1939 coup.
"Regrettably, I have not identified any one great bargain that should skyrocket if an all-out war erupts."
"The situation was very different 50 years ago. When Hitler's troops overran Poland in 1939, my partners and I thought one reaction was inevitable - the price of sugar would go up. This commodity represents the most concentrated, easily transported, universally craved food commodity in existence. Napoleon said armies march on their stomachs. And every soldier wants something sweet in his rations."
"In September 1939, Cuban sugar was selling at 1¢ a pound - or less. Most sugar producers were bankrupt or just emerging from bankruptcy. One such was a Cuban enterprise controlled by the Royal Bank of Canada. It had been reorganized with a large income debenture issue and 20,000 shares of common stock."
"The Royal Bank owned 13,000 of the 20,000 shares outstanding. There was a market, strangely enough, for the 7,000. And my partners and I started to buy a little. We started at a price range of $7 to $9 a share. Then we had the period of the so-called phony war when Hitler was gathering his forces to overwhelm France. And everybody thought the war really wasn't going to amount to anything. And the price of sugar went down and sugar stocks went down. Our little favorite stock went to $1-3/4. Then we had a real war and sugar prices started to go up.
"Eventually, I sold the last 10 shares that I owned at $200 a share. I think that's the only 100 to 1 profit that I have ever made. And, obviously, it was on a very small scale. However, those things are very nice if you can find them. Is there anything like that likely to happen in 1990? If so, oil would seem to be the preferred commodity in the present situation."
Oil today is a different story.
"Unfortunately, the oil situation has no resemblance whatsoever to sugar fifty years ago. Oil is produced in thousands of oil fields on every continent in the world. The temporary absence from the market of a single country - even a country as important to oil as Iraq or Kuwait - will have only a temporary effect. Other oil producers can boost their output quickly. And in the United States, we have abundant supplies of natural gas, which can serve as a substitute for oil to a considerable extent...."
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