21 December 2007

Investment guide/nonpartisan introduction to the coming energy crisis

The Coming Economic Collapse: How You Can Thrive When Oil Costs $200 a Barrel

Stephen Leeb
Business Plus, 2007

For those who aren't familiar with the issues surrounding the peak in oil production, this easy-to-read book provides a short introduction to the hard times ahead. It also serves as a resource for those investor-types who want to try to surf that chaos and make a tidy profit. The authors, both experienced financial writers, set the stage for discussing the imminent oil shortage and its consequences by recounting the late-90s tech bubble and the fact that few investors noticed the unsustainability of this bubble. "The oil delusion is a mirror of the technology delusion. While almost everyone in 1999 believed that the bull market in technology would endure, almost everyone today believes that the bull market in oil is temporary" (12). Needless to say, the authors don't share this assessment of the oil market and go to great pains to explain their contrarian conclusions. The coming peak in oil production (whether this year or in 20 years), the increasing insecurity of American oil supplies, and the growing need for energy resources in China and India are creating "a clash between supply and demand that will send oil prices soaring to unprecedented levels" (19). According to the authors, the only thing that will postpone this hyper-bull market in oil is a worldwide depression, a situation that none would consider beneficial.

The near-future scenario outlined by the authors is similar to that predicted in other works on peak oil; in short, it entails at best a massive depression and reduction in societal complexity, and at worst the complete collapse of the economy and of civilization as we know it. "[A] crisis of epic proportions is brewing" (89). They assert that this crisis can be prevented or at least mitigated against and they repeatedly affirm their hope that it will be. However, they also recognize the profound failure in American leadership and the profoundly deluded perceptions of our economists, media, and citizenry about this looming crisis. In the 10th chapter, they outline a few possible visions of what the world of the near-future might look like---decline, stasis, or Armageddon---none of which options is particularly appetizing to someone raised in a world of boundless growth and opportunity.

The primary author, Stephen Leeb, holds a PhD in psychology, and he uses this expertise to articulate the blind spots of conformity and groupthink that are contributing both to this crisis and to the fortunes that will be lost with the economic downturn. Wise investors like Warren Buffett and George Soros have succeeded because they've not followed conventional wisdom. Likewise, the reader is challenged to abandon groupthink and to grapple with the reality of this looming crisis, both for reasons of personal financial success and for reasons germane to the whole of human civilization.

It is in the final two chapters that the authors outline their preferred investment classes and strategies for growing wealth in the hard times ahead, so if you just want them to show you the money, so to speak, you can skip the rest and read those concluding chapters. For those who want an introduction to the coming energy crisis, the rest of the book is an excellent, nonpartisan place to start.

(This review was originally written on March 6, 2007.)

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