So I read Crash Course by Chris Martenson. I haven't read much on peak oil or the inevitability of the crisis we are in or about to be in, so it was an eye-opening read. I was always in the camp of "technology will save us". I never considered that technology takes energy to run and takes energy to even make, all of which is in increasingly short supply.
After reading this and trying to apply to an ER or ERE scenario, how would one invest for income? It seems to me like no matter how things go down, we will still need money. I don't see the situation degrading to the point where the concept of money goes away completely...and if it does, well then this post doesn't matter!
Anyways, my question is, since commodities don't really do anything or provide any income (what do you do with gold, look at it? Find someone to pay more than you did?) how does peak oil influence your investing strategy? Do you stay away from certain businesses and industries and go all in on others (oil and utilities come to mind...).
Any insight would be greatly appreciated.
Crash Course Investing
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OurLifeInc.
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Surely those things are fun 
But what about the rest of your accumulated wealth? Do you put it in income producing assets, such as dividend stocks? If yes, do you use peak oil and coming changes as a guide for investment selection? I guess the real issue I took with Crash Course was the focus on commodities. I guess mostly because they are a difficult asset for me to understand. They seem like more of an emotional asset, tough to assign a value to.
But what about the rest of your accumulated wealth? Do you put it in income producing assets, such as dividend stocks? If yes, do you use peak oil and coming changes as a guide for investment selection? I guess the real issue I took with Crash Course was the focus on commodities. I guess mostly because they are a difficult asset for me to understand. They seem like more of an emotional asset, tough to assign a value to.Ahem,
If you are talking *crash*, then you ought to follow it up with readings such as these, as conventions break down in such scenarios.
http://cluborlov.blogspot.com/2011/04/f ... anism.html
If you don't subscribe to this notion, search for "Stephen Leeb" and learn some more
HTH
If you are talking *crash*, then you ought to follow it up with readings such as these, as conventions break down in such scenarios.
http://cluborlov.blogspot.com/2011/04/f ... anism.html
If you don't subscribe to this notion, search for "Stephen Leeb" and learn some more
HTH
I'm still in the "technology will save us" camp.
I think doomers ought to read other stuff for balance. Try David Blume's book "Alcohol Can Be A Gas" for example, about how permaculture, small-scale distributed production and unused agricultural waste can be utilized to produce alcohol at less than $1 a gallon. Bigato can tell you how great a job Brazil is already doing of it.
Just the other day there was a Saudi Prince talking about how OPEC ought to try to keep oil at $70-$80/barrel rather than $100+ in order to keep the infrastructure of less expensive alternatives from developing. What do you think he's worried about? Alcohol was the fuel of choice since it was so cheap, but then when prohibition came Standard Oil lobbied congress to make denatured alcohol production illegal too to stifle the competition and make oil our fuel of choice.
There's tons of misinformation out there about alternative fuels and Blume convincingly busts each myth one by one. It doesn't affect the food supply, it doesn't require new inventions (it can be done right now), with the right engine you can actually get more mpg out of alcohol than you can with gasoline, it doesn't require petroleum based fertilizers or farming, it creates more energy than it takes to produce, etc.
Heck making my own alcohol is a part of my retirement plan so I can cut down on transportation costs. I can't wait for gas to hit $15/gallon, I'll have the roads all to myself
That said, I'd say invest in an alcohol co-op or large scale plant (you'd probably have to become a private partner since I'm not sure there are any publicly traded companies that would fit the bill) but try to find one that operates on permacultural principles rather than relying on petroleum-based agriculture.
I think doomers ought to read other stuff for balance. Try David Blume's book "Alcohol Can Be A Gas" for example, about how permaculture, small-scale distributed production and unused agricultural waste can be utilized to produce alcohol at less than $1 a gallon. Bigato can tell you how great a job Brazil is already doing of it.
Just the other day there was a Saudi Prince talking about how OPEC ought to try to keep oil at $70-$80/barrel rather than $100+ in order to keep the infrastructure of less expensive alternatives from developing. What do you think he's worried about? Alcohol was the fuel of choice since it was so cheap, but then when prohibition came Standard Oil lobbied congress to make denatured alcohol production illegal too to stifle the competition and make oil our fuel of choice.
There's tons of misinformation out there about alternative fuels and Blume convincingly busts each myth one by one. It doesn't affect the food supply, it doesn't require new inventions (it can be done right now), with the right engine you can actually get more mpg out of alcohol than you can with gasoline, it doesn't require petroleum based fertilizers or farming, it creates more energy than it takes to produce, etc.
Heck making my own alcohol is a part of my retirement plan so I can cut down on transportation costs. I can't wait for gas to hit $15/gallon, I'll have the roads all to myself
That said, I'd say invest in an alcohol co-op or large scale plant (you'd probably have to become a private partner since I'm not sure there are any publicly traded companies that would fit the bill) but try to find one that operates on permacultural principles rather than relying on petroleum-based agriculture.
Alcohol fueled car?... I can't wait!
http://www.metacafe.com/watch/1320143/h ... cohol_car/
I think I'm leaning towards soft crash / technology will save us... But I think a bad crash is a possibility.
Seems very likely that gas will continue to rise. But if the talking head's are forced to admit that the "economic recovery" failed, oil might crash down to $30 a barrel. Efficient market, ha ha.
Diversification protects me from my ignorance.
http://www.metacafe.com/watch/1320143/h ... cohol_car/
I think I'm leaning towards soft crash / technology will save us... But I think a bad crash is a possibility.
Seems very likely that gas will continue to rise. But if the talking head's are forced to admit that the "economic recovery" failed, oil might crash down to $30 a barrel. Efficient market, ha ha.
Diversification protects me from my ignorance.
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BeyondtheWrap
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I think the way I'm leaning is:
1. Invest for income now, as normal, as if nothing will happen.
2. Hope that the crash doesn't occur for at least a few decades so that I'll be able to ERE with plenty of time to spare.
3. Use my free time in ERE to learn self-sufficiency skills to prepare for a possible economic collapse.
I think Jacob has written about this before. ERE means you'll be in a good position whether or not a collapse occurs. If there's no collapse, it's okay, you're retired and have enough to live on for the rest of your life. If there is a collapse, you'll have better skills than the people who held specialized jobs that don't involve real skills; thus you'll be in a better position to provide for yourself and barter if you need to.
1. Invest for income now, as normal, as if nothing will happen.
2. Hope that the crash doesn't occur for at least a few decades so that I'll be able to ERE with plenty of time to spare.
3. Use my free time in ERE to learn self-sufficiency skills to prepare for a possible economic collapse.
I think Jacob has written about this before. ERE means you'll be in a good position whether or not a collapse occurs. If there's no collapse, it's okay, you're retired and have enough to live on for the rest of your life. If there is a collapse, you'll have better skills than the people who held specialized jobs that don't involve real skills; thus you'll be in a better position to provide for yourself and barter if you need to.
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jacob
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Presuming the question is strictly about financial investments (no amount of financial investments is going to make life comfortable if, say, you're trying to buy heating fuel that just isn't there), here's what I observed from the previous crashes with some extrapolation thrown in.
1) Resource prices are not going to keep going up, up, up, ... price increases are going to stall the economy and crash it which will drop the price. The secular trend is upwards, but the intermediate 5-10 swings are wild. This is one reason, I don't favor direct commodity producers.
2) Consequently, I favor companies that distribute commodities. The companies make money regardless of what the underlying commodity costs. We're talking utility companies (I like nuclear and wind), supermarkets in central locations (I like Walgreens), real estate (senior housing good, strip malls and hotels bad), telecom (the circus of the 21st century), and banking.
3) The government has shown its willingness to bail out certain sectors. I believe the "protected" sectors are banking, telecom, and energy. Without those government can't function.
4) I'm 80% in the pure income camp. I believe that capital gains pretty much amount to speculation. That's not to say that I won't prefer cash when P/Es are >20 (like now) and that I won't prefer stocks when P/Es are <10. But overall, I my portfolio is pretty widow-like.
If you're investing in your personal stash, there's a lot of talk about skills, but "spare parts" are for some strange reason never discussed. Unless you have a machine shop, you can have all the skills in the world, but you won't be able to put it to use. If you don't have metals for your shop.
Also keep in mind that economical solidarity [in the US] is very low. You'll likely have more gated communities and supplies will go to them, etc. The market system will be kept functional as long as possible. The best approach is not to depend too much on it. What I mean is that there are some who think that due to peak oil they better save $5M instead of $2M. I doubt this is going to postpone their problems that much... the difference is just 25 years of inflation at the current rate ... maybe the future rate will be much higher.
1) Resource prices are not going to keep going up, up, up, ... price increases are going to stall the economy and crash it which will drop the price. The secular trend is upwards, but the intermediate 5-10 swings are wild. This is one reason, I don't favor direct commodity producers.
2) Consequently, I favor companies that distribute commodities. The companies make money regardless of what the underlying commodity costs. We're talking utility companies (I like nuclear and wind), supermarkets in central locations (I like Walgreens), real estate (senior housing good, strip malls and hotels bad), telecom (the circus of the 21st century), and banking.
3) The government has shown its willingness to bail out certain sectors. I believe the "protected" sectors are banking, telecom, and energy. Without those government can't function.
4) I'm 80% in the pure income camp. I believe that capital gains pretty much amount to speculation. That's not to say that I won't prefer cash when P/Es are >20 (like now) and that I won't prefer stocks when P/Es are <10. But overall, I my portfolio is pretty widow-like.
If you're investing in your personal stash, there's a lot of talk about skills, but "spare parts" are for some strange reason never discussed. Unless you have a machine shop, you can have all the skills in the world, but you won't be able to put it to use. If you don't have metals for your shop.
Also keep in mind that economical solidarity [in the US] is very low. You'll likely have more gated communities and supplies will go to them, etc. The market system will be kept functional as long as possible. The best approach is not to depend too much on it. What I mean is that there are some who think that due to peak oil they better save $5M instead of $2M. I doubt this is going to postpone their problems that much... the difference is just 25 years of inflation at the current rate ... maybe the future rate will be much higher.
I'm in the camp that you really cannot predict with reasonable certainty what is going to happen if we have a catastrophic event--so excessive efforts at preparation are not likely cost effective. (That being said, I fully admit to reading "survival" books--although, more for consumption value than to actually implement most of the suggestions.)
Throughout modern history, societies have remarkably rebounded from devastating events such as Britain and Germany after WWII and Hiroshima and Nagasaki. My believe is that human societies have a natural gravity towards order and organization. While an economy or culture can be "primitive" it can still have some "good" characteristics such as a nuclear family, valuing friendships, honoring the brave, promoting virtues, etc.
The economic system that will develop after a major event will depend on the resources readily available; the skill level of the remaining labor force; the functionality of various levels of government (which goes to the issue of property right protection and protection from foreign invasion); and transaction costs. Nonetheless, some system will emerge (and it is highly likely that it will be more complex than pure bartering).
I think the best way to "insure" yourself is to not necessarily develop survival skills or buy guns (although, this is fine), but to stay healthy (because primitive economies and societies typically place little value on the unproductive and the sick--at least that is my perception).
Jacob- what do you mean by pure income? Individual bonds, REITs, MLPs, and/or dividend stocks?
Throughout modern history, societies have remarkably rebounded from devastating events such as Britain and Germany after WWII and Hiroshima and Nagasaki. My believe is that human societies have a natural gravity towards order and organization. While an economy or culture can be "primitive" it can still have some "good" characteristics such as a nuclear family, valuing friendships, honoring the brave, promoting virtues, etc.
The economic system that will develop after a major event will depend on the resources readily available; the skill level of the remaining labor force; the functionality of various levels of government (which goes to the issue of property right protection and protection from foreign invasion); and transaction costs. Nonetheless, some system will emerge (and it is highly likely that it will be more complex than pure bartering).
I think the best way to "insure" yourself is to not necessarily develop survival skills or buy guns (although, this is fine), but to stay healthy (because primitive economies and societies typically place little value on the unproductive and the sick--at least that is my perception).
Jacob- what do you mean by pure income? Individual bonds, REITs, MLPs, and/or dividend stocks?
I did not read everything, but nothing is free in life. Even if we made gas out of our own feces it would not begin to reach the levels of our demand for energy at our current state. Alternate options are available, but have you tried making your own alcohol which powers your vehicle? I bet it is no cheaper than existing gas prices.
@firefighterjeff
It's not so hard if you invest a little design time up front and employ lots of automation, and if you don't waste anything. You could dry the biomass all summer and save it for the colder months and then use waste heat from the process to heat your home, cutting your heat bill. You could also heat the mash with wood or methane produced from previous spent mashes. The waste mash after methane production is high-quality feed for fish, worms and many types of livestock and makes great compost. The methane by-product is very valuable, it's pretty much the same thing as natural gas so it has all kinds of applications.
But the process requires a source of biomass. For my personal use I've calculated I'll need about 1 acre of growing space.
Plus you need knowledge in embedded systems programming, welding, farming and bio chemistry. There really aren't any commercial systems you can buy that would be perfect since there are so many different biomass sources, it would be tough to mass-produce a small-scale automated system flexible enough that doesn't end up wasting a lot of potential energy. So the whole thing has to be customized. So it would be at least a few thousand up front for the equipment and hours and hours of up front labor putting it all together.
Plus you're talking 50-150 hours of labor each year planting, harvesting and operating the distilling equipment.
And yeah, 5 gallon mash? More like 150 gallon minimum runs.
I guess for most people a project like that sounds like a nightmare. Me? I can't wait to build one.
It's not so hard if you invest a little design time up front and employ lots of automation, and if you don't waste anything. You could dry the biomass all summer and save it for the colder months and then use waste heat from the process to heat your home, cutting your heat bill. You could also heat the mash with wood or methane produced from previous spent mashes. The waste mash after methane production is high-quality feed for fish, worms and many types of livestock and makes great compost. The methane by-product is very valuable, it's pretty much the same thing as natural gas so it has all kinds of applications.
But the process requires a source of biomass. For my personal use I've calculated I'll need about 1 acre of growing space.
Plus you need knowledge in embedded systems programming, welding, farming and bio chemistry. There really aren't any commercial systems you can buy that would be perfect since there are so many different biomass sources, it would be tough to mass-produce a small-scale automated system flexible enough that doesn't end up wasting a lot of potential energy. So the whole thing has to be customized. So it would be at least a few thousand up front for the equipment and hours and hours of up front labor putting it all together.
Plus you're talking 50-150 hours of labor each year planting, harvesting and operating the distilling equipment.
And yeah, 5 gallon mash? More like 150 gallon minimum runs.
I guess for most people a project like that sounds like a nightmare. Me? I can't wait to build one.