[JLK]

The Oil Factor: How Oil Controls the Economy and Your Financial Future

Essentially, this book is an investor's guide for those who believe that the Peak Oil theory has credibility. It was exactly what I was looking for; it is well written and gives specific advice down to the level of individual stocks.

So what investments do they recommend? I shouldn't give away the store, but they are generally bullish on the large and independent oil companies, not so bullish on the oil service companies and they like gold. An entire chapter is devoted to the virtues of Berkshire Hathaway and its ability to make money in both inflationary and deflationary environments. The book is written from a realistic and nonpolitical standpoint, and they are quite open with their opinion that defense stocks will do well as the United States will need to flex its military muscle to ensure access to diminishing oil production in the future, not only in the Middle East but also in places like Nigeria and Venezuela.

Alternative energy is recommended as well; they think that General Electric will be well positioned for the advent of wind power, although I am somewhat skeptical of this because of the minuscule impact that this division will have on the company's overall profits. Toyota Motor Company is recommended as a possible alternative energy play because of their technological leadership in hybrid vehicles. The authors are bearish on just about all of the other automobile manufacturers, particularly the European and American companies.

A basic premise of the book's recommendations is their prediction that we will soon be in inflationary environment caused by the spiraling price of oil. They have an interesting model, the premise of which is that if oil prices are 80 percent or less greater than the previous year's oil prices we should be investing with the expectation of inflation, but if oil prices increase more than 80 percent within a one-year period we should begin readjusting our portfolio to hedge against deflation.

The book is an interesting read, and I would recommend it.

[Pops]

That’s very interesting re: the 80% rule.

I’ve seen all manor of predictions about events after oil prices “skyrocket”, but very few definitions of “skyrocket”.

[Leanan]

$this->bbcode_second_pass_quote('', 'i')f oil prices increase more than 80 percent within a one-year period we should begin readjusting our portfolio to hedge against deflation.

[JLK]

The book didn't (at least as far as I remember) address the devaluation of the dollar and what effect that would have on the 80% threshold. When priced in Euros or benchmark commodities such as gold, oil really isn't that much more expensive than it was a year ago. Certainly not as much as it appears in dollar terms.

Currency depreciation is usually associated with inflation. I wonder whether the inflation --> deflation inflection point should be adjusted upward in view of the dollar's fall over the past year.

[MattSavinar]

I'm reading Leeb's book right now.

One thing I have to wonder - he mentions several times that high oil prices will spurn alternatives - but never mentions what these might be.

He does recommend a combination of coal and wind - and while these will help a modest amount, there is no way they will deliver enough net energy to make up for the shortfall in oil supply we will be experiencing.

This leads me to believe he thinks the situation is far, far worse than he even lets on in the book and in his interviews.

I have to believe the same about Roberts.

In other words, they are delivering as harsh a message as they think the public could handle

As far as the quality of the book - if you have money and want to invest, it I would definitely recommend it.

Matt
http://www.lifeaftertheoilcrash.net