Long-term Pessimism in the Economy

Bulls and Bears. They’re usually easy to spot on the internet. The Bulls have months-old sounding pitches for how to get rich with stocks and real estate (I’m amazed that on satellite radio, I can still hear commercials touting some guy’s course for buying and flipping houses and making boatloads of money!).

The extreme-Bears are easy to spot, too. Their websites usually have ads for survival food, retreat land and home construction, guns and ammo and radiation detectors.

Somewhere in the middle is Robert Kiyosaki, who wrote Rich Dad, Poor Dad, an excellent common-sense manual for financial security. Kiyosaki’s pessimistic about the economy right now, though:

In an earlier column, I stated that it was time to sell all nonperforming real estate. My market indicator? A checkout girl at the local supermarket, who handed me her real estate agent card. She was quitting her job to become a real estate professional.

As a bull market turns into a bear market, the new pros turn into optimists, hoping and praying the bear market will become a bull and save them. But as the market remains bearish, the optimists become pessimists, quit the profession, and return to their day jobs. This is when the real professional investors re-enter the market. That’s what’s happening now.

From an article posted July 22, 2008.

Am I optimistic for the long-term? Absolutely not. I still believe we’re due for the mother of all market crashes, and that the U.S. economy is running on borrowed time — and I do mean borrowed. I think most baby boomers are in serious financial trouble, and that oil will climb above $200 a barrel. Inflation will also increase, causing more pain for the poor and middle class.

The Fed is flooding the market with nearly a trillion dollars of liquidity, which is why I believe gold under $1,200 an ounce and silver under $30 an ounce are bargains. Gold and silver should peak and decline before 2020, completing two 20-year cycles. My exit is to sell silver around 2015. I plan to hold onto gold, income-producing real estate, oil wells, and stocks.

Most of us know the bull climbs slowly up the stairs, but the bear jumps out the window. I believe the bull is still climbing the stairs, and the bear hasn’t jumped yet. But rest assured that it will.

Agreed.

Peak Oil and Peak Everything…Including Football

One of the very dangerous things about Peak Oil is that it will eventually have an effect on everything in our daily lives.

Everything.

Consider Peak Football and waving goodbye to Ronaldo. In short, Rob Hopkins, blogging at Transition Culture discusses the possible trade of a Manchester United player for a large amount of cash. Hopkins points out that, though he’s a huge fan of Ronaldo, given the trouble now coming into view because of Peak Oil, the team might well be better served by eliminating a lot of debt than having a world class player on its roster.

In this discussion, Hopkins has an interesting idea:

I spent a couple of days last week attending the Green New Deal think-tank type event in London, and at one point we were asked to speak about what we thought we would see in the world in 50 months from now (late 2012). One of the things I came up with was “the first World Cup Finals to be cancelled because no-one could get to them”.

Obviously, he’s talking about a world where it’s too expensive to travel. That world is approaching fast, my friends. Because it’s such a horrible thought, most Americans don’t think it through to its logical conclusion. This is all very dangerous because if fuel costs too much for us to travel, and too much to drive to work every day, it’ll be too expensive for the trucks to bring the Twinkies, Doritos and 24-can cases of Bud Light to the neighborhood Safeway, too. This is a serious, serious, problem.

Because here in the U.S. we spend so much energy talking about whether Peak Oil even exists or not (global warming, too, for that matter), we don’t have anything left to discuss what the hell to do about it, and that’s a problem.

The absolutely insane “drill, drill, drill” crowd, led by the far right talk radio pitchmen are successfully keeping the discourse on the truth or lie of the approaching problem, while countries like the UK are moving forward on “transition,” hoping to preserve as much of their way of life as possible as oil becomes more costly. Since the British culture is far less dependent on the automobile, they’re way ahead of us, and in that is perhaps our answer.

Many, including James Kunstler, don’t think it’s possible for the U.S. to even come close to preserving our current way of life. American culture is based on the suburb, which is made possible by cheap oil. Without cheap gas, the suburbs don’t work. Unfortnately, we don’t have a plan ‘B’. It’s the auto or nothing. We’ve allowed our rail system to decline to the point where it’s a joke, and would require enormous quantities of effort, money and belief to turn it around. Possible? Sure. If we had a government capable of both understanding the problem and rallying us in a space race-like effort, we could accomplish creating a new rail system that would take a lot of the pressure off of the automobile. But, the men and women who make up our government are mostly ignorant of the problem, spending their time fund-raising so they can get re-elected, and cutting political deals to enrich themselves (which is why they want to get re-elected). So, they rely on lobbyists and twenty-something aides to “formulate” their opinions and their beliefs on the issues confronting us today. lt’s a recipe for disaster.

I read about the transition movement in the UK and long for similar projects to grow here. There’s some of it, of course, but our leaders are so busy dealing in fantasy and cinematic messages like “the terrorists are coming and I’m the one who can protect you!” and “I have the plan that can fix the economy.” It’s all nonsense. We might as well elect Bradgelina as first couple and just be done with it. Neither Obama nor McCain will be any more influential in finding a solution to our problems that Brad Pitt and Angelina Jolie would be. Come to think of it, the latter couple probably, in reality, have a better grasp of the problems affecting our world today than the former two, both of them beltway bandits looking to the American people to immortalize them with election to the White House.

As the Housing Market Collapes, Neighborhoods Become “Ghost Towns”

As Michael Panzer points out at Financial Armageddon today, Jim Kunstler writes about a distopia where the suburbs are abandoned and become the new slums. Peak Oil and the housing bust feed on the final, inevitable collapse of the great American suburban experiment.

Interesting piece by Alex Roth of the Wall Street Journal about how half-built suburban developments strand early buyers in “post-calamity” like communities.

It’s a serious situation that will be worse before it gets better.