This is the strangest investment book I've ever read. The authors spend about 170 pages (out of 196) explaining why the economy may collapse. The premise is that Peak Oil Theory is correct, that the supply of cheap oil is dwindling, and as a result, society as we know it may change drastically.
The weird part is that after each gloom-and-doom scenario they paint, the authors provide a glimpse of hope. For example, they mention that the shortage of cheap oil may cause a new age of barbarism and lawlessness that will result in a lot of people being killed as a relatively small number of strong clever people take what they need to survive... but we'll show you how to profit from it!
It's not quite humorous, but it comes close. The investment advice seems solid. After they spend 170 pages explaining how they were right about the price of oil (predicting further that it could hit $100 by the end of the decade, which of course it has) and how energy affects everything and which historical trends to learn from, and so on, I'm inclined to trust their advice.
So when society crumbles and we all go back to living a pastoral existence on an Amish-style farm near a small town, I'll be able to sleep on a huge pile of hundred dollar bills.
This book was written in Feb 2006 and I am just now reading it. Had I read it (and believed it) then, I would have made a lot of money over the past few years on his recommendations. Question now is whether there is still any validity to the strategies given where we have come in last 24 months. (Gold $400->$1000, Oil $60->$110, etc.)
I personally agree with many of his general thoeries: 1.) We are at a supply limit on crude oil. Growth in this environment is going to be down right impossible. 2.) Consequently, serious inflation (ala the 1970's) is coming our way. 3.) The Fed will lack the ability and wherewithal to affect monetary policy to fight the inflation. Because the limited supply of the products we need to sustain, monetary policy alont can't correct it, without a serious economic downturn. Fed's January actions indicate that they care much less about inflation than growth any way.
Leeb plays all of it to the extreme and comes up with some dire consequences of our ways. We will all end up farming our back 40 acres to survive?
Things I strongly disagree with him is that governments should allow market conditions to take full hold even if that means paying $12 a gallon for gasoline. What Leeb calls tax breaks for oil companies are ridiculous misunderstandings of the business and why those tax benefits are in the code. 1.) Depeletion -> No other industry is producing from reservoirs (cash streams) that are 10-35% less every year. 2.) Deduction of Drilling Costs -> You CAN NOT treat drilling costs like normal equipment. They are sunk costs. Wihtout the abilility to deduct that as an expense would absolutely KILL drilling in this country.
He supports using these taxes to develop alternative energy sources, his biggest pet project being wind. LEEB wake up! The wind does not blow all the time. The sun does not shine all of the time. These are ineffcient methods for energy. Fossil fuel use is here to stay and must be a part of a reliable energy poilcy going forward. Besides how hypocritical to state on one hand that we should not be "subsidizing" fossil fuel usage while at the same time knowing full well that wind turbines simple don't make economic sense without federal tax breaks and subsidies. Why? Because electrical generation plants can't depend on them. They HAVE to have a coal/natural gas back up.
All said, this is an eye opening book and he nailed a lot of precictions (a big whiff on real estate) and they probably came true a lot earlier than even he thought. I will most likely change my personal portfolio based on a lot of his thoughts.
There are two aspects to this book, or perhaps I should say two parts. Part one is a warning about the energy crisis to come. Leeb feels that unless we do something quickly in terms of building an infrastructure for a new source of energy not based on fossil fuels and certainly not based on oil, which is at or near its half-life, we may face the collapse of civilization. That's the worse case scenario. Part two is advice to investors on where they should put their money as the oil patch runs dry.
In a sense this is an update of The Oil Factor: Protect Yourself--and Profit--from the Coming Energy Crisis (2005) which Leeb wrote with Donna Leeb. The message is the same although his projected price of oil has gone up from $100 a barrel to $200 a barrel. With oil topping $65 a barrel in the interim, it looks as though Leeb may very well be right in his prognosis.
I did not note this in my review of The Oil Factor, but Leeb's PhD is in psychology. He edits a newsletter "The Complete Investor" and is obviously an expert on matters financial. I think the combination of hard-headed economic insight that he brings to the subject and his understanding of human psychology, especially the psychology of the herd, is part of what makes this and his previous book so interesting and valuable. Furthermore, Leeb is an unusually lucid writer (with help here from Glen Strathy). His clear prose makes the pages turn easily and he leaves no doubt about where he stands on the energy issues.
However, where he stands politically is deliberately unclear. He makes a point of not getting political in this book. Although it must be the case that he has little patience with the energy policies of the present administration, he never really directly says anything bad about George W. Bush, at least not by name or title. However, a question like this from page 38 gives us a hint: "Why do societies not replace shortsighted, closed-minded leaders with others who are willing to make tough decisions for the greater good?" On page 62 he makes this comment: "...we believe the coming oil crisis will be the biggest test our civilization has ever faced, thanks to a shortsighted leadership that has taken few steps to prevent it."
Leeb believes that bad decisions made by our leaders both governmental and corporate stem from what he calls "groupthink"; that is, the human propensity to go along with the majority opinion. He recalls some rather infamous psychological experiments that show people will actually inflict torture on others if they think that's what an authority figure wants, or will disbelieve their eyes if their eyes go against the majority opinion. His central message is that we have to look at the facts and see the long run if we are going to make the transistion from an oil rich economy to an economy without oil.
He believes it can be done, but that it will be difficult. It estimates that the cost of retooling our energy infrastructure to live without oil will cost in the neighborhood of one trillion dollars. He calls this an investment on the scale of the cost of World War II (p. 141), and he believes it is just as necessary. He warns that the coming oil shortage could lead to nuclear war as the various countries become desperate for energy. (p. 128)
His investment choices are much the same as in "The Oil Factor": buy energy stocks, buy gold, and prepare for double-digit inflation, perhaps on the scale of what we had in the seventies and early eighties. I did a quick check of six specific stocks he recommended (MMM, KO, INTC, PG, TXN, and GE) and three are up and three down since the book was published. Gold however is up 20% and the oil company stocks up almost as much.
Bottom line: very much worth reading and digesting and comparing to other points of view.
--Dennis Littrell, author of “The World Is Not as We Think It Is”
This book was written in 2006, and the author had tremendous insight into what we are seeing in the economy today - 2008. Oil was less than $50 per barrel, and the author, contrary to government or other experts, was predicting oil to go well over $100 per barrel. In fact, the sub-title of the book is "How you Can Thrive When Oil Costs $200 a Barrel." Seems like this is very likely now, given the basic laws of supply (declinein goil supply) and demand (China, India, etc.). The author also outlines how and why the real estate market might collapse - which we are now in the midst of.
The book provides insights beyond the economy and investing. The author discusses the decline of past civilizations, groupthink and how our world might change if oil or an alternative energy supply is not available. "We will be compelled by circumstances ... to conduct the activities of daily life on a smaller scale ... the downscaling of America .. the complexity of human enterprise will also decline in all fields ...." He suggests that we all may be forced to live more simply as the Amish live.
It may be a little late to take advanatge of some of the investing insight (recommendations)in the book, but it still provides valuable insight - on several fronts.
A thoughtful approach to the explanation as to why oil will be in short supply and how the world will react to it. According to the author, the coming oil crisis will not be a temporary blip like that of the 1970s...this one will be ongoing and life altering.
I particularly liked, this example highlighting the urgency for finding an new energy source. Think of a granary. Your neighbor owns it. You get all your food from them. You know that the silo is never able to be filled. More is going out than going in. You know they will run out at some point. Wouldn't you look for another source of food? Now imagine the neighbor does not like your family. Wouldn't looking for another source of food be a top priority? This put it in perspective for me.
As for how to make money in this crisis...well that's one man's opinion. I'm not an expert in investments but I'll be monitoring his choices.
The subtitle of this book is "How You Can Thrive When Oil Costs $200 a Barrel." Leeb, who holds PhDs in economics, math, and psychology, presents a bleak but believable picture of a world in which oil is no longer available to the average person. He discusses the world's depleting oil supplies, the world-wide dependence on oil, and the consequences of not pursuing a replacement power source. It is a pretty frightening scenario. This books was written in 2005, and his prediction of skyrocketing oil costs was validated by last summer's spikes. His discussion of "group think" in regards to both the environment and economics was especially interesting to me. The book includes an appendix of tips for investing in what is sure to be a changing world. While I don't have either the science or the economic background to totally understand all he said, there was plenty here to make me think and re-evaluate my views.
This book was certainly no letdown from past Stephen Leeb books. There are many insightful and very realistic views of the possibilities of not just the United States, but the world as a whole, when the oil crunch really begins to hit hard. More than investment advice as his past books lean toward, this books seems to be almost an outcry for action to prevent a series of unfortunate events as a result of the greatest problem our civilization will have to face--the coming energy crisis.
Exellent and objective analysis of energy economics from 2005 (published in 2006), which have proven to be disturbingly accurate. Criticisms of this book, based on the investment advice it gives, are overdone, as investment strategies comprise very little of the book, itself. The book is more about the social and economic consequences of a high global demand for oil and an oil supply that is declining.
You'd think a book with this title would be pretty pessimistic. However, his economic forecast written in 2006 is, though accurate, shockingly not pessimistic ENOUGH!!! He laid out the dangers of housing inflation, but predicted that it couldn't possibly deflate because the prospect was just too horrendous to contemplate. I've got his Game Over book in my hands right now and looking forward to reading his thoughts of the 2008 crash aftermath.
The author's overall conclusions are spot-on, but like most financial advice books, this ship has already sailed. He spends some time recommending that everyone go back to 2004-2005 and read and follow the advice in his first book. I found this both amusing and frustrating.
You might expect this to be a typical "the sky is falling" type book. Its not. Its very well reasoned, researched, has a broad view of history and states reasonable conclusions without too tight timelines. Very good education!!
Excellent book, very accurate and foretelling. The book was written in 2006, I read it in 2008 when basically the stuff was happening that they predicted. Except that oil never reached $200, but was well over $100, they pretty much had it nailed.