D. McHattie

Peak Oil for Dummies

This is why the next bubble will be in alternative energy.

Not that I disagree with the author's conclusion that alternative energy is a wholly inadequate replacement for oil.

But, in an effort to calm public panic, governments will hail alternative energy technologies as the solution to our problem.

Deflation vs. Inflation: The Great Debate Rages On

We are still talking about inflation and deflation as though they affect all assets, goods and services equally. This is usually, in general, true. But not now.

While I believe that it is never 'different this time', I also believe that each situation is slightly unique.

What makes our current situation unique is the uneven impact of inflation and deflation.

The most important factor today is the decline of US dollar hegemony. Not only do our trading partners no longer want to hold our currency as their reserves, they don't want to conduct transactions between each other in our currency. The dollar will decline.

As the dollar declines, the value of everything that cannot be exported from the US declines. Real estate, for one, is impossible to export and will continue to fall. US labour is another item whose value will diminish.

Labour-intensive goods and services made/provided in the US for the US market will decline in price. This is bad news for factory workers, barbers, landscapers, truck drivers, etc.

Items sold on the international markets will increase (ie: ag commodities, base metals). So will items that can take the place the US dollar currently occupies as a reserve (ie: precious metals).

The Good, The Bad, And the Inaccurate Oil Forecasts

John Lounsbury, thank you very much for the note of caution. I find your comments are always insightful, respectful and well-organized.

Everytime I read the prospectus of an alternative energy company I am left feeling that I have found the next microsoft. This forces me to conclude that I have no clue and no ability to separate the wheat from the chaff in this area. So I let the Wilderhill clean energy index do that for me with an investment in PBW for now.

While my strategy sacrifices the biggest returns, it also should minimize the downside risks. This approach is also more consistent with my core competence, which is macro trends and the big picture. I realize this identifies me as an amateur but, hey, at least I know it.

I may make smaller gambles on specific companies to try to goose returns and, well, for fun. Kicking myself that all my cash was tied up and I couldn't buy FSLR when Steven Chu was appointed energy secretary. Can't win 'em all.

Thanks again.

The Good, The Bad, And the Inaccurate Oil Forecasts

To confidently invest in the oil industry you need to conclude that oil prices are headed higher in the not too distant future.

If you invest in alternative energy you really don't have to figure out anything.

If the price of oil rises then it will lift the profitability of alternative energy as, well, an alternative. If the price of oil doesn't rise, we have ample assurances from the president-elect and congress that support of development and use of alternative energy will be a key component of a massive, massive stimulus package.

As an investor, why would I even bother trying figure out what is going to happen with oil prices when alternative energy is already in my hotel room, drunk and wearing a french maid costume?