[MonteQuest]

I had a pointed discussion with a friend recently about peak oil and the economic ramifications. In response, he sent his investment firm the following e-mail:

$this->bbcode_second_pass_quote('', 'h')ttp://www.youtube.com/watch?v=4fo3sxhBylw

This link will take you to a short report from CNBC that was posted on YouTube - about Peak Oil. In addition to stating that is very near, the experts talk about the disasterous impact it will have on our economy.

So, it would be good to know what you all have in mind. When the oil shocks hit, it will be very bad. Obviously, we don't want to lose what we have earned. How will you protect our funds when there is essentially nowhere to hide?

J

[Twilight]

Maybe that's their 'Standard' Customer reply.

I wouldn't be surprised if the real customers get less of a copy & paste service. I would imagine a few tens of millions of dollars cuts through the bullshit fast.

[vision-master]

$this->bbcode_second_pass_quote('', 'H')ow many other investment counselors and investment firms will follow suit?

[SchroedingersCat]

The irony here is that peak oil is going to cause most of its initial damage by stomping on the house of cards that is the world's current hallucinated economy.

You shall reap what ye sow.

[venky]

I believe that a near term economic catastrophe or collapse is unlikely though prolonged recession marked by continuous oil price shocks might achieve a similar result over a period of decades.

I think the main flaw in their reasoning is assuming that alternatives will allow us to continue business as usual. Barring breakthroughs in technology that seem unlikely , it is much more likely that 20-30 years from we will be looking at running our economy at perhaps about half to two thirds of the current energy supply with a net decline each year. That almost invariably will mean less economic activity. While I dont believe our economies will collapse, a lot of people will struggle, in finding jobs, protecting their savings and investments.........

[MonteQuest]

$this->bbcode_second_pass_quote('venky', '.')..it is much more likely that 20-30 years from we will be looking at running our economy at perhaps about half to two thirds of the current energy supply with a net decline each year. That almost invariably will mean less economic activity. While I dont believe our economies will collapse, a lot of people will struggle, in finding jobs, protecting their savings and investments.........

[Tyler_JC]

"No growth means no return on any investment."

I disagree with that statement.

Just because the entire economy isn't growing as an aggregate, does not mean that some sectors or some companies could not be growing and thus providing a growth avenue.

There will always be some growth industry somewhere, the problem is that the number of growth industry will be overtaken by the number of "decline" industries when we begin to experience energy shortages.

Most of the new growth will come from cannibalizing other businesses.

For example, Wal*Mart grows by killing small, local retailers. Are they a "growth industry"? I would be reluctant to call the addition of a Wal*Mart to one's town at the expense of two dozen other shops a "growing economy". And yet Wal*Mart provides a return on investment despite the overall decline in that town's economic output.

I know I'm splitting hairs, but to say that Peak Oil means the end of all investment has just never made sense to me.

[Jack]

Delving back into memory - a hazardous journey - I recall that the U.S. did extensive planning for a full-scale nuclear exchange with the Soviets.

Their expectation was that the markets would shut down temporarily, that the economy would regress about 20 years, and that the population would be reduced by about 15% - 20%. (Again, be cautioned that my memory may be faulty).

We can contrast this with Peak Oil. In a nuclear exchange, infrastructure is instantly destroyed. With Peak Oil, it's more likely to slowly degrade, except in those instances where civil unrest damages it. Of course, our society may well be less cohesive than it was in the nuclear war planning days.

So...what does this mean for investments? Probably the markets won't instantly implode. It is possible they could go into a downward trend, with fluctuations above and below the trend line. Probably (not certainly - governments might interfere) energy-oriented investments will appreciate. Probably (again, not certainly), precious metals oriented investments will appreciate. Probably, insurance-oriented, treasury bond based, and FDIC insured investments will survive to some degree.

But I do suspect this won't occur in one terrible instant. Rather, the initial patterns will stretch over a decade or more.

[pup55]

$this->bbcode_second_pass_quote('', 'J')oe Blow"
Investment Counselor
"In-the-dark" Investments

[vision-master]

Those guy's are in it for only the money.

[venky]

$this->bbcode_second_pass_quote('MonteQuest', '')$this->bbcode_second_pass_quote('venky', '.')..it is much more likely that 20-30 years from we will be looking at running our economy at perhaps about half to two thirds of the current energy supply with a net decline each year. That almost invariably will mean less economic activity. While I dont believe our economies will collapse, a lot of people will struggle, in finding jobs, protecting their savings and investments.........

[steam_cannon]

Quote:
"As soon as it becomes cheaper to use some alternative energy source, producers and consumers will adapt. "
There is no substitute for natural gas fertilizers, nor is there a ready substitute for home heating or driving fuels. This might as well say as soon as it become cheaper to die producers and consumers will do so. If there is no alternative, their logic doesn't work.

"We hold that aboveground factors will play the major role in dictating the end of the age of oil. "
Demand destruction?

"1. Based on a detailed bottom-up approach, CERA sees no evidence of a peak before 2030. "
CERA is nuts!

"2. Despite his valuable contribution, M. King Hubbert's methodology falls down because it does not consider likely resource growth, application of new technology"
All these factors have historically had no impact on the depletion curves for oil or metals.
Denial ain't just a river in Egypt...

venky
"a lot of people will struggle"
Yeah, starving for food...

pup55
"For some reason a lot of these corporate types, particularly sales guys, are high on the "judgemental" and you cannot really convince them otherwise."

My wife was signing up for a bank account today and the banker was telling some bullshit about how giving them your work number in case they need to contact you for some important info. I pointed out that yeah, they want to know where she works so if she is cutting phony checks they can find her quicker. The banker said, "yeah that's the other reason..." The thing is in business, unless you are talking directly to the owners of a company, you are not allowed to talk about negative things, even if they are the truth. That is American corporate culture. So you are required to spew bullshit and positive spin about things that are in no way positive. So it is not that these people cannot be convinced, just in American businesses they are not allowed to talk about anything negative.

venky
"I am not convinced of the argument that end of growth as a whole means end to all possibilities of investment (like Tyler said) or or a collapse of a significant portion of our economy. After all society did not collapse during the great depression even if there was substantially lesser economic activity"

If you are in a bread line hoping for food, society has collapsed (investment portfolios of the wealthy be dammed).

So what is the biggest economic ramification of peak oil?
EROEI is not a problem.
Peak oil will not happen, but if/when it does it will be no trouble at all.
The moon will provide our electric power with Helium-3
Helium-3 will provide us with Hydrogen for our Hydrogen Economy!
Trust big brother!!!
Or not.

[MonteQuest]

$this->bbcode_second_pass_quote('Tyler_JC', ' ')I know I'm splitting hairs, but to say that Peak Oil means the end of all investment has just never made sense to me.

[MonteQuest]

$this->bbcode_second_pass_quote('venky', ' ') After all society did not collapse during the great depression even if there was substantially lesser economic activity.

[cube]

I've noticed that MOST people think of investment as a 1 directional system...up. I can only imagine the absolute horror on an "investment advisor's" face if I were to tell him / her that personally I'm equally psychologically comfortable going short or long.

PO will destroy the stock market for good. The stock market as we know it today was invented in England during the industrial revolution about 300 years ago. Is it a happy coincidence that the stock market was invented at the time when humanity discovered how to harness the power of fossil fuels?

Fossil fuels/cheap energy makes it possible to have an economy based on perpetual expansion.
There can be no stock market without perpetual expansion.
The Dow Jones can't go up if you live in a steady state economy. If stocks can't go up then nobody is going to buy them --> no stock market. It's that simple.

BTW it's perfectly possible to have a commodity futures exchange in a steady state economy. However that's a totally different game. That's based on the idea that somebody has to lose so somebody else can win (aka a zero-sum game).

[mmasters]

Well if it's any consolation I used to work for Goldman Sachs and I currently work for one of the world's largest banks.

I work in the middleoffice/backoffice so I'm not where the investment decisions are made, but processed. Anyhow through my experience most people inside these places are VERY clueless on the big picture though they like to think they're part of something "important".

I personally think we have a few years of globalization followed by a global depression. Most all investments will be wiped out. Gold will form a huge bubble in the crash and then crash itself at dizzying heights. Best bet is to buy gold and when the disaster hits begin to move towards cash.

[bshirt]

$this->bbcode_second_pass_quote('mmasters', 'J')ust look at us. Everything is backwards; everything is upside down. Doctors destory health, lawyers destroy justice, universities destroy knowledge, governments destroy freedom, the major media destroy information and religions destroy spirituality.

[JasonHam]

I think most people/business/government overlook the most important aspect to Peak Oil. OverPopulation. To me, that is the crux of the problem. There are going to be an enormous amount of people that will have to go without. This is going to create all kinds of problems and not just with the worlds energy supply.

[cube]

$this->bbcode_second_pass_quote('JasonHam', 'I') think most people/business/government overlook the most important aspect to Peak Oil. OverPopulation. To me, that is the crux of the problem. There are going to be an enormous amount of people that will have to go without. This is going to create all kinds of problems and not just with the worlds energy supply.

[Twilight]

$this->bbcode_second_pass_quote('cube', '')$this->bbcode_second_pass_quote('JasonHam', 'I') think most people/business/government overlook the most important aspect to Peak Oil. OverPopulation. To me, that is the crux of the problem. There are going to be an enormous amount of people that will have to go without. This is going to create all kinds of problems and not just with the worlds energy supply.