Posts Tagged ‘predictable’

Who predicted what reversed the growth of Phoenix, Las Vegas, Greece, and Ireland, etc?

June 13, 2012

Who predicted what reversed the growth of Phoenix, Las Vegas, Greece, and Ireland, etc?

how many dollars

The key question from the 2004 publication: “…The Real US Deficit: OIL?” was this: “How many dollars will it cost to buy a gallon of gasoline next year (2005)?”

In 2003, I published warnings of an emerging global credit crisis what would bring down real estate prices in particular as well as reduce stock prices and overall economic activity (spending and borrowing). In 2004, I specified that rising fuel prices would be the specific trigger of a wave of changing habits of borrowing and spending. I also explained then why the long-term trend of fuel prices had reversed in 1999, why that rise of fuel prices could soon accelerate dramatically (which was widely recognized by 2008), and what effect such a spike in fuel prices would have in various places depending on whether that particular area was energy-rich or energy-scarce.

First, what predictable effect would the spike in fuel prices have on oil-rich regions like Alaska and Alberta? In recent years, oil-rich Alaska and Alberta have predictably continued to thrive, even while other energy-importing states in the US and other provinces in Canada have been predictably experiencing tremendous declines in economic activity and thus tax revenues, resulting predictably in downgrades in the credit-worthiness (financial stability) of the government of many states and provinces.

During the years of 2000-2008, Alaska GDP grew at an annual rate of 7.4%….” By 2010, it was the #2 state in the US for GDP per capita and it was still the only state to pay it’s residents a dividend to reward them for living there instead of somewhere else (over $3,000 per year).

So, as oil prices rose over 1100% from 1999 to 2008, oil-rich places like Alaska, Alberta and many OPEC nations would experience a huge trade surplus. In contrast, energy-scarce places like Japan, Greece, Ireland, Phoenix, and Las Vegas would experience a huge wave of economic conservatism.

English: Vector image of the Las Vegas sign. P...

English: Vector image of the Las Vegas sign. Português: Imagems vectorial da placa de Las Vegas. (Photo credit: Wikipedia)

Once the first wave of conservatism resulted in a decline in global energy consumption, energy prices sharply fell (in 2008). However, any forecaster who already understood the simple geology and simple economics behind the rise of fuel prices which started in 1999 would have also known that the change in behavior arising by 2008 was just the first wave of an emerging revolution in values and behaviors.

In fact, by mid-2005, behavior had already changed in the most energy-scarce areas (the sprawling desert suburbs). Since I was expecting such a change, I reported it within a few months as the predictable first indications of the emerging shift in the US.

May 15: Las Vegas, Nevada is founded with auct...

“Before”: Las Vegas, Nevada . (Photo credit: Wikipedia)

Downtown Las Vegas, Nevada and Red Rock Canyon...

“After:” a recent picture of downtown Las Vegas, Nevada and Red Rock Canyon behind, seen from Frenchman Mountain (Photo credit: Wikipedia)

Prior to mid-2005, there had been a trend of huge economic growth in Phoenix and Las Vegas throughout the 20th century due to advancing technology and plummeting energy costs. As air conditioning for buildings and automobiles became more and more economical, the barren wastelands of Las Vegas and Phoenix had first become popular vacation destinations and then popular places to live, even during the intense summer heat.

By mid-2005, that trend was changing. As global energy prices spiked, the cost rose sharply of long commutes in 115 degree weather (with the auto AC cranked up, thus using far more gasoline than in the winter) and so did the cost of summer electricity bills, which even surpassed the monthly mortgage payment in some cases. Rather than moving further out in to the suburbs and getting bigger and bigger homes, people predictably started moving closer to the urban hub and in to smaller and smaller homes which reduced total energy costs.

Within a few years, most of the US (except for Alaska of course) had similar issues to a lesser degree: more spending on fuel and less spending on most everything else: construction, stock market investing, education, entertainment, and so on. The same shifts had already been evident in much of Europe starting in 1999 and in Japan starting at the end of 1989.

japan 21 years

As the waves of economic conservatism flow across Japan and Europe and the US, consumers and owners of businesses predictably get more and more selective about how they spend their money, what sources they value as relevant and trustworthy and authoritative, and how much attention to put on personal responsibility after the decades of trends toward relying presumptively on distant mega-corporations, government bureaucracies, mainstream media empires, and even mainstream religious institutions. Who has promoted relevant adaptions and who has encouraged naivete, blame, rage and hysteria?

angry alex jones

Did the mainstream media warn you of these issues or entice you to take actions that resulted in disappointment and then incite blame for the results you created with your choices? Did mainstream educational institutions prepare you? Did mainstream religious institutions prepare you? Did governments warn you of these issues or encourage you to be naively confident?

Many of those institutions are declining in authority. In contrast, certain individuals and networks are distinctive in their newly established relevance and leadership.

bush obama

Many people may experience fear upon recognizing the simplicity of what is emerging. Some of them will respond to the fear with courage and responsibility. Others will attempt to repress the fear or project it by blaming some isolated group of villains (whether vilifying the scapegoats presented by the media or directly vilifying the corporate media and those who rule it). They may also cling to some optimism naively or even hysterically, which again may be encouraged by some institutions.

Those institutions are serving their purpose. They are distracting those who are easily distracted. They are sorting those who are ready and willing to be responsible from those who prefer the complacent luxury of another frightened blame and of another desperate hope.

While I used to think of Alex Jones and David Icke and David Wilcock and even Jon Stewart as admirable and relevant, I now assert that, to the extent that they fan the flames of hysteria and divisiveness, they simply distract those who are easily distracted. Again, that may be their entire purpose. I admit that George Carlin and Bill Hicks were witty and bold, but there are other valuable qualities that may be a higher priority. I prefer Alan Watts or Robert Anton Wilson.

If you are open to new results, then you might explore new actions and new guidance. If you recognize that you might value the guidance of one of the people who predicted the changes of recent years and recommended the actions that would have entirely avoided loss and produced enormous benefits, let me know.

opec vs non opec


2003, 2004, 2005 forecasts of real estate decline plus predictable political reaction

May 2, 2012

Oct 18, 2005:  “Just don’t be surprised when your
$100,000 home is assessed at $50,000 in a few years….”


Oct 26, 2005: “I’ve been saying the real-estate boom ended around August 1- based on stock
charts of real estate sectors [HGX, DJR, EQR, EOP]. Now that the September “lagging indicator” data
is in, how long before people say “maybe it is ending soon?”


In January 2009, President of the United State...

In January 2009, President of the United States of America, George W. Bush invited then President-Elect Barack Obama and former Presidents George H.W. Bush, Bill Clinton, and Jimmy Carter for a Meeting and Lunch at The White House. Photo taken in the Oval Office at The White House. (Photo credit: Wikipedia)

Sep 14, 2006:
“So, re investing… I want to talk about real estate, again. As a recap, I have been forecasting a large drop in real estate for over 3 years now. The next paragraphs in italics highlight that.

On March 3rd, 2003, I wrote: “Unless you have a very specific reason to believe that real estate will outperform all other investments for several years, you may deem this prime time to liquidate investment property (for use in more lucrative markets).” (See in which I explicitly suggested that of these [5] markets: commodities, stocks, the mining sector, real estate, and bonds, the best two were commodities and the mining sector. And what happened?)

On June 9th, 2003, I wrote this: ” Some people think… real estate is a safe return, but how many of them recognize the assumptions involved in that conclusion?”  (See ) In the concluding remarks, I said: “If you still are holding investment real estate in the US next week, email me your favorite assumptions explaining why.” (No one did.)

Even after real estate was still rising, as of November 7, 2004, I did not let up. I was still making warnings with plenty of time to do some research and move a household before any crash started:

“… Some people even refuse to explore the evidence of [market] predictability. Others make naive predictions like “real estate always appreciates,” ignoring Houston, Silicon Valley, Japan, the 1930s Global Depression, and the bombing of Baghdad or Oklahoma City: “Do I hear nine million? How about eight million? Boom! … Do I hear one hundred?” (If only I had known about New Orleans….)

So does all that sound like an alarmist? That may be because I was sounding an alarm! And, it really is laughable to me how devoted some people are to real estate- indeed the the same people will say “I do not believe in market forecasting” and then say “I forecast that real estate markets will continue to be strong…” oops- except they are not strong and haven’t been for at least a year.

On 9/6/05, I wrote about oil primarily, but including how oil markets effect real estate markets. Still, “Real Estate” appears 43 times in .

The most profound segment of the article may be, indeed, my brief, direct explanation of how the “baby boom” (a temporarily increased rate of population growth) predictably effected demand for housing, and yet how the vast majority of people were surprised anyway- at the beginning and end of that trend. Very briefly, the trend was that “the baby boomers” started turning home-buying age and then, coincidentally a few decades after the end of the birthrate increase, suddenly the number of people reaching home-buying age decelerated. Shocking, eh?

May 30, 2005, I wrote: “If you would like to review the data of what has already happened in recent years, this may also motivate you to consider re-assessing any current exposure to unstable markets and systems, including the US Dollar and US Real Estate markets.”

Then, over a year ago, I reported the end of the real estate rise- because I was looking for it. That report featured 5 straight weeks down in the US housing sector in August 2005. Here is a current chart on the housing sector of the US stock market$hgx&p=W&b=5&g=0&id=0 [Note that when I published this in 2006, the chart showed the first part of the decline shown here: ]

Recently, [again this was in 2006] mainstream media has begun to report the declining that I started reporting a year ago. You see the years of issuing alerts for real estate… I was right, again! 😉

But now [2006] I am issuing a panic alert. Now that the mainstream media is reporting what I forecast several years ago, those who did not consult accurate forecasts years ago or the news reports I gave a year ago, now they are finally starting to look at the data of what has already happened and some are naturally reacting. Each “knee-jerk” reaction can enhance a snowball effect.

I gave you my warnings, and for those of you who have not heeded them yet, this is a new warning- an alert only- but a very strong warning. The US real estate decline is now over a year old. No accelerated panic has yet begun, but once the lending market buckles, then it may be too late to exit real estate quickly. There are still many unscrupulous buyers out there… for now. Some folks will see the news and even believe that real estate is now discounted to a bargain. That might be a reasonable possibility, if not for the fact that lending markets are generally predictable.”

Real Estate Office

Real Estate Office (Photo credit: pixieclipx)

More excerpts:

Oct 18, 2005

I mentioned real estate a lot already in the prior
emails…. I’ve already told you about the other dominoes that will fall after the
first catalyst triggers a drop in real estate- and
many folks seem to get some of that- but my sense is
that most folks still do not accept the possibility of
deflation (or currency appreciation in general), and,
after repeated references, I figure either most of you
basically understand it or don’t care enough to use
your search engine or even just call me and ask….

If you get that $100,000 loan because it is only
$333 per month to service the mortgage (the first
year), that is fine. Just don’t be surprised when your
$100,000 home is assessed at $50,000 in a few years….

US President George W. Bush presents the Presi...

US President George W. Bush presents the Presidential Medal of Freedom to Pope John Paul II during a visit to the Vatican in Rome, Italy in June 2004. (Photo credit: Wikipedia)

As usual, I want you all to be aware of the
larger changes in our midst. All these economic
changes will mean political changes. The President

[which was George W. Bush in 2005]

will be scapegoated (whether for good cause or not)
and likely removed- seriously.

[I meant impeached, and though Bush was not impeached,

his approval ratings went from amongst the highest of all 

US Presidents as of 2005 to among the lowest by 2008.]

If you don’t know how
big a deal a 15% drop in real estate prices is, you
will- and it should be much deeper than that. 

[a much bigger decline in price than 15%]

Political encroachments are likely to accelerate.
Since the cause of the anger of the people will not be
satisfied by removing one “public servant,”

[Note that as of now Obama has almost as many critics

as Bush did by 2008.]

and in
desperation to garner support, more international
violence (including in America) is likely…. Note this sort of
economic correction is not only what led to the vast
influx of socialism into the US in the 1930s (the New
Deal), but the scapegoating of one leader after
another was also recently manifested in the Japanese
Depression of the 1990s (which continues to this day).

After all, if it is not “them” (“their fault”), then
“we” would have to accept responsibility… to act
responsibly (economically, sustainably)! That just
doesn’t usually inspire voter turn-out like “we will
fix everything for you.”

Presidents Gerald Ford, Richard Nixon, George ...

Presidents Gerald Ford, Richard Nixon, George Herbert Walker Bush, Ronald Reagan and Jimmy Carter at the dedication of the Reagan Presidential Library (Left to right). Français : De gauche à droite, les présidents américains Gerald Ford, Richard Nixon, George H. W. Bush, Ronald Reagan et Jimmy Carter à la bibliothèque Ronald Reagan Presidential Library (1991) où se trouve une reconstitution du bureau ovale. (Photo credit: Wikipedia)

I’ve been saying the real-estate boom ended around August 1- based on stock
charts of real estate sectors [HGX, DJR, EQR, EOP]. Now that the September “lagging indicator” data
is in, how long before people say “maybe it is ending soon?”

Oct 26, 2005:

real estate prices: how predictable?

April 1, 2012
Here is a chart of recent US residential real estate prices and US commercial real estate prices. Do you notice that the red line peaked and then declined, which was followed by the black line peaking and declining?
With that chart in mind, let’s imagine that there could be such a thing as a leading indicator. A leading indicator would be some measurement that consistently precedes certain consequent developments.
What other data could predict changes in price trends of overall US real estate prices? How about prices of specific subcategories, like selling prices of new homes only in a certain specific region? Isn’t it possible that certain prices (like of new homes only) would drop in a particular region first, prior to an overall drop?
How about this: could future prices be predicted by the recent volume of sales? Could the volume of sales be predicted by the recent volume of pending sales (signed contracts that have not closed yet)? Could the volume of pending sales be predicted by the recent volume of mortgage applications for pre-approval of real estate financing? Could the results of consumer confidence surveys predict things like the volume of mortgage applications or the NAHB rating for traffic of prospective buyers?
National Association of Home Builders

National Association of Home Builders (Photo credit: Wikipedia)

What? Is there really such a thing as the NAHB and do they really track the traffic of prospective buyers? (Yes and, by the way, the NAHB is the National Association of Home Builders.)

So, there are a lot of leading indicators tracked and monitored by conservative investors (and by conservative, I mean those who do research into leading indicators before they invest). For instance, here is a notable report on mortgage applications for “new home” purchases dropping 27% in a single week in 2010: (while applications for “used homes” dropped only 14 or 15 percent that week.)
There is even data tracked for the volume of existing homes listed for sale. So, when sales volume dropped in certain categories, then volume of unsold homes listed for sale started to multiply, what would be natural to expect regarding future prices of similar homes? (I’ll give a real example below.)

First, here is the same chart as before, but with two added lines. Note that I just drew some lines on there, but you can imagine what kind of data could indicate in advance what would happen next in US real estate prices.

On that note, here is something I wrote in October of 2005, right after reading the NAR (National Association of Realtors) report that was released that day to report September 2005 data. (You can see my original comments in full at this link:

“…actual sales are down almost 20% from last month, while excess inventories keep rising. Even more importantly is… price. Look at housing in the west, the most expensive region: down ALMOST 10% from last month. Do you think the rest of the nation will be stable while California prices are tumbling?”

I could have added that the previously booming areas of Phoenix and Las Vegas were also struggling. In fact, I later did in October 2006. Here is a new update regarding Phoenix area real estate.

Date Single Family & Condo
25th Percentile
Asking Price
Asking Price
75th Percentile
Asking Price
03/07/2011 30,053 $85,000 $144,990 $275,000

08/28/2006 27,703                     $255,000$339,000$505,000

09/01/2005 8,030 $269,000 $380,000 $630,000

While some people might be startled to note that the median price has fallen from $380,000 to under $145,000 ( a drop of over 60%- and actually up more than $5,000 since January), next is what I find even more interesting. The inventory of homes listed for sale is still much higher now than in 2006- meaning that the excess of unsold homes listed for sale is currently worse than in 2006 right before prices declined by about $200,000.

So, is there  a shortage yet of unsold housing for sale again in Phoenix like there was in 2005 right before the market collapsed? Nope- not even close.

Now, I offer those examples simply for historical reference. They are not particularly important to me and perhaps not to you either. But here is where it gets interesting….

Consider that the amount of spending for exploration for oil deposits is a leading indicator for discovery oil deposits. Consider that the following chart shows the correlation between the timing of exploration and discovery (as well as extraction and refining):

It is reasonably logical to predict that we can only discover oil that we look for, right? And we can only extract oil that we discover first, right? And we can only refine oil that we extract first, right?

Okay, so now that you are clear on the simple and really quite obvious principle of leading indicators, now let’s look at a chart that is much more important than something trivial like prices for commercial or residential real estate.

That chart shows exactly how discovery peaked in the mid-20th century, with production still rising. But then production (AKA extraction) peaked in 2006:

Now let’s look at that same chart with the main data broken down into two subcategories: non-OPEC production and OPEC-production.

Notice that except in the early 1970s, non-OPEC production has exceeded OPEC production. Now was there anything unusual about the early 1970s in global economics? I was so young; let’s move on….

Around 1985, non-OPEC countries produced about twice as much oil as OPEC countries. The above 1999 chart showed a forecast that in 2008, OPEC countries would match the productivity of non-OPEC countries- now did anything unusual happen in 2008 in global economic patterns? Anyway, let’s look ahead to 2020 or 2040 and consider which countries are currently dominant economically and also consider which ones are predictably likely to rise in prominence- or even become singularly dominant, with 2:1 ratios of oil productivity- or even 10:1 by 2040.

So the US and USSR rose to singular prominence in the 20th century as the #1 and #2 producers of oil in the world. Those two nations were known as “superpowers.” Then, the USSR collapsed a few decades ago.

Is it possible that there will ever be a different global economic superpower than the US? Is it possible that there already is? Is it possible that the US, which now consumes around 25% of the world’s resources with less than 5% of the world’s population, might eventually consume less than 25% of the world’s resources?

Considering that oil extraction peaked in 2006 and may continue down forever, is it possible that even if the US continues to consume 25% of the world’s oil, the total consumption worldwide could eventually diminish- perhaps just a little? For instance, if, in a particular year, all of the oil in the world were consumed in the US, but that was only 1 barrel of oil, then consuming 100% of the world’s total consumption would still only be 1 barrel.

Now, are there any questions about the predictable future prices of suburban US real estate? No? None at all? Not even one?

Maybe I distracted you with that reference to over 30,000 unsold homes listed for sale in the Phoenix area… because you were thinking that you did not see any reason not to own at least 25% of them yourself. Maybe you missed everything else in the article.

I just hope that you got the part about possible leading indicators like mortgage applications and the NAHB index of the traffic of prospective buyers. You do know that all that stuff is going to be on the test, right?

(completely unrelated graph placed here for absolutely no reason:)

First Published on: Mar 9, 2011

Related articles

the DominOil Effect

January 5, 2011

“The DominOil Effect” is a term that I first used in the following article in 2004, titled “…The REAL US Deficit: Oil.” You can read it here:

The video below is my new presentation of 1/5/2011, with a few visual aids below that. First, here is some background on my use of the term DominOil Effect, which is a variation of “the Domino Effect” in which it is easy to predict a sequence of events.

Here is a section of that article in which I suggested a parallel between the recent history of the city of Houston after the oil industry declined there to the future of the US (and UK and EU etc). See how well it fits with the developments of the years since I wrote it in 2004.

“…reviewing the details of what happened in Houston, consider the following “snowball effect” as a potential “drop in the bucket” of what could be coming soon.


First, the oil companies in Houston merely cut a few expenses. They spent less money with local businesses. A few at a time, oil employees lost their jobs and thus they also spent less money at local businesses, causing the loss of more income. Many businesses and families went deeper into debt, expecting things to improve soon. Some people even refinanced their homes to pay other bills.


But the oil boom did not resume in Houston. Growth had slowed, then stopped, then reversed. As more and more former oil company employees were looking for work, they were willing to accept jobs for less and less. As the economy slowed, more related businesses shrunk or closed. Just after finding a new job, many people were laid off again.

Eventually, more delinquency on mortgages led to more foreclosures. With so many foreclosure auctions, most local housing prices dropped. People who had just refinanced their homes suddenly owed more than their homes would sell for, plus many had even less income than before.


Bankruptcy rates increased. Divorce rates increased. Crime rates increased. Illness rates increased.

People moved away. Fortunately, Houston is next to lots of places that are not so dependent on the oil industry.


Some moved from Houston all the way to booming Silicon Valley. There, the same thing happened involving the high technology industry in the last few years: companies closed, incomes dropped, borrowing increased [temporariliy], mortgages defaulted, real estate prices dropped, etc….”

inflation-adjusted oil prices worldwide (above in red) have led inflation-adjusted gasoline prices in the US (below in green)

more of Fibonacci‘s sequences:

rising gas prices and your future

December 30, 2010

note: my charts are primarily for “illustrative purposes,” though I included some precise data below as well.

According to the US DEPT OF ENERGY, gasoline was more two times as expensive in Germany and Denmark than the US in 2008, but prices in oil-rich Venezuela were barely 3% of the US price… or about ten cents per gallon! In between the extremes, prices in Mexico have been around 20% less than in the US, and prices in Indonesia have been around 80% below US gasoline prices.


Regular Unleaded Gasoline Prices in 2008
Country        US Dollar price PER LITER
United States
Venezuela 0.0260

Note that inflation-adjusted prices of gasoline in the US went from an all-time LOW in 1998 to a new HIGH by 2007:

source for image above: US DEPT OF ENERGY:

So, why did US prices of gasoline and oil keep dropping in the 1980s and 1990s? Obviously, the main reason was increasing oil production worldwide even as US production declined (see charts below). Another big factor was innovation in the systems used to extract oil, featuring a relatively new technology known widely as “computing.” Extraction of crude oil was much cheaper in the last few decades because of computer technology and related advances in engineering. However, in the absence of any major advances in the operating technology of the oil industry in the last decade, prices soared. Why? Perhaps because global demand for oil is still soaring, while the rate of global extraction of oil peaked in 2006 and may begin to decline at an accelerating rate as more and more oil wells are emptied faster and faster.

The decline of US oil production looks about the same whether or not we include the oil extracted from Alaska and the Gulf of Mexico (either way, about a 50% decline in the US’s output of oil from 1970 to 2010):

now, global oil production rates:

Those charts are just for oil, so now back to gasoline. Note that from the all-time low of inflation-adjusted US prices of gasoline and oil in the late 1990s, gas prices are up only about 100% so far, while oil prices rose by over 1000%! If gas prices rose that much, that would be over $16.50 per gallon of gas in the US (and around $30 per gallon for most of Europe). So, why are European economies de-stabilizing? Couldn’t gasoline prices soaring already above $6 and even $8 per gallon possibly be a MAJOR factor?

FUEL PRICES ACROSS Europe, 2001-2008:

Gasoline and Diesel Prices for Selected Countries 2001-2008 (Dollars per gallon)
France Germany Italy
Year Gasoline Diesel Gasoline Diesel Gasoline Diesel
2001 3.51 2.71 3.40 2.79 3.57 2.95
2002 3.62 2.75 3.67 3.00 3.74 3.05
2003 4.35 3.39 4.59 3.79 4.53 3.75
2004 4.99 4.16 5.24 4.41 5.29 4.41
2005 5.46 4.81 5.66 5.01 5.74 5.21
2006 5.88 5.13 6.03 5.30 6.10 5.53
2007 6.60 5.66 6.88 6.06 6.73 6.03
2008 7.51 7.03 7.75 7.37 7.63 7.43
Spain United Kingdom
Year Gasoline Diesel Gasoline Diesel
2001 2.73 2.35 4.13 4.25
2002 2.90 2.46 4.16 4.29
2003 3.49 2.97 4.70 4.82
2004 4.09 3.55 5.56 5.68
2005 4.49 4.20 5.97 6.25
2006 4.84 4.50 6.36 6.63
2007 5.36 4.96 7.15 7.34
2008 6.13 6.25 7.42 8.14
Source: Energy Information Administration, “Retail Motor Gasoline Prices in Selected Countries, 1990-2009” and “Automotive Diesel Prices for Non-Commercial (Household) Use, Selected Countries, Recent Years.”

As demand soars, what has been happening with supply (available inventory)… and prices?

US prices of alternative fuels for 2005-2008, from:

EZ Gains (and a “conspiracy theory” about the burning of fuels leading to warming)

November 9, 2010
EZ Gains… and a conspiracy theory about burning fuels leading to warming



Because some profits are easier than others.

Aren’t some people older than others? Aren’t some people smarter than others? Aren’t some people braver than others?

How about this: aren’t some companies older than others? Well, even if a company may not be very old, it can still work very well with smart people, especially if those people are brave, too.

Back in 2003, when many old companies were ignoring the risks of the global lending market (including the subprime mortgage market) as well as ignoring the geological realities of things like oil and natural gas and coal, some people were smart enough to look closely at the behavior of investors worldwide… plus brave enough to admit the obvious. One of the most obvious things is that fossil fuels are finite resources.

Another obvious thing was that if humans burn more and more fuel for decade after decade, then eventually there will be much less of those fuels. For economies dependent on oil, that dependency could get very expensive- and not just in terms of dollars, but also in terms of social stability, human welfare, quality of life, and even national security.

Another obvious thing is that all that burning of fossil fuels might heat things up a bit, right? Still, lots of people choose to argue about things like the possible causes of global warming, with some activists maybe protesting against sunlight and others protesting against empty oil wells. 😉

Smarter people might actually predict in advance that burning huge amounts of fuel worldwide might result in a measurable rise in heat. However, it can take a lot of bravery to stop arguing about who to blame and admit that billions of people are involved in the global economy.

By the way, the global economy is just a phrase that actually means the actions of a whole bunch of humans. The global economy is not something that happens to us. It is something that we do.

Anyway, in early 2003, I published an article about the future of the global lending market, which just means the lending and borrowing of a whole bunch of people. I specified in particular the increasing risk in the real estate market of countries like the US, which had become so dependent on borrowing. I also forecast a continuing surge in global prices of commodities like oil and gold, contrasting that with the diminishing opportunity for gains in the US stock market.

In 2004, I published “The Real US Deficit: Oil.” In 2005, I published “Worth it’s weight in… Oil,” noting the practical priority of oil over all other global markets, as evidenced by the price increase of over 1200% from 1999 to 2008, while other commodities of lesser current importance, such as gold, went up “only” by a few hundred percent. So I took the old phrase “worth its weight in gold” and replaced gold with the commodity that everyone who has ever waited in line 5 minutes to get gas knows is far more important than gold: oil. Most people also know that oil is the source not only of gasoline and kerosine and so forth, but also plastic and many pharmaceuticals and pesticides.

As the years went by, myself and others continued publishing articles and giving lectures about the easily predictable future of things like oil prices, the US real estate market, the US stock market, and even things like the fact that the burning of fuels can result in the melting of ice, as in the case of oceans rising faster and faster. In addition to lots of publications and lectures, I recorded a video in 2006 (and uploaded it to the internet) which detailed the sequence of events that would predictably result in the collapsing of major financial institutions like banks, brokerages, and insurance companies. In 2008, that precise sequence of events was frequently referenced in the mainstream media as “surprising.” Major banks in the US, Europe, and elsewhere were facing similar troubles to those faced in similar circumstances, such as in Japan in the 1990s.

Of course, in Japan in the 1980s, many smart forecasters had been brave enough to publicly forecast what developed in the following years, too. As often happens with unpopular forecasts, when those precise developments which had been forecast did arise in the 1990s, the mainstream media in Japan called those developments “surprises.” Soon, the public poured their hopes in to promising reforms and then desperate rescue packages and then eventually a string of politicians with shorter and shorter periods between receiving public confidence at first and then later being blamed as incompetent or even as traitors.

Some things are easily predictable. For instance, burning fuel raises the temperature.

Also, smart people recognize what is obvious. But perhaps only smart people that are also brave would be willing to accept responsibility for adapting to what is obvious. Others may be surprised by the surge of heat in the summertime or in the direct sunlight at noon, and then may look for someone to blame for the surprising heat, such as certain politicians. In fact, that may just be the first stage of adapting. Making personal adjustments may come eventually for them, such as embracing the most obvious opportunities to make easy gains.

So, aren’t some people smarter than others? Further, aren’t some people braver than others? Well, aren’t some results more valuable to you than others?

worth its weight in oil PART 2

October 29, 2010
The shift of influence from the USA to the Middle East
Shifts in influence and power are inevitable, and even constant. Let’s focus first on one of the most obvious developments of the last one or two hundred years: the rise to global prominence of the USA.

Of course, the USA is only a few hundred years old, but it has been a very distinctive emergence. In particular, an enormous shift of influence away from Europe to North America, particularly the USA, has developed in the last hundred years or so.

After several prior centuries in which European empires have been prominent worldwide (such as the Roman Empire or the colonization of the Americas by the British, Spanish, and French), for at least the last one hundred years, European authority has been receding. The USA is widely identified as the subsequent center of imperialism, with the only major competition to the imperial dominance of the USA in the 20th century coming from the USSR.

In the 20th century, what distinguished the USA (and the USSR) from the previously dominant regions of Europe? How about the most important new commodity in the world: oil?

The USA was the home of the development of the oil industry. The USSR was the host of some of the largest deposits of oil discovered in the early 20th century. By the 1940s, Germany and Italy, two of the last of the old European powers, surged across Europe into the USSR. The UK and later the USA partnered with the USSR to oppose the advance led by Germany. By the end of the conflict, Germany and the UK (and France among others) were ravaged and receded from global prominence.

The USSR had 22 million casualties, yet still emerged as a primary global influence, second only to the USA (or first, depending on who is ranking the two). But beyond the rivalry of these two, no other rivals were even close as of the 1950s or 1960s.

Русский: Марка СССР English: June 14, day of A...

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So, oil brought the USA and USSR to global prominence. By the mid-20th century, the world’s two leading producers of oil were the USA and the USSR, which were military allies in World War 2. These two countries were also the leading exporters of oil.

Countries that produce and export oil can be called “oil producing and exporting countries,” as in O.P.E.C. By 1973, the term OPEC became associated not so much with the original leaders in the oil industry (the USA and USSR), but with Middle Eastern nations such as Saudi Arabia and Iran, where recent discoveries of oil- indeed a majority of the world’s remaining oil deposits- catapulted that region into global prominence. That brings us to a predictable shift in the near future: the continuing rise to global prominence of the Middle East, with the foundation for riches and influence still being oil and the associated petrochemical industry (including gasoline, plastic, pesticides, medicines, etc).

However, there are many contrasts between the rise of the USA and USSR compared to the rise of the Middle East. Note that Middle Eastern countries have a single dominant language, Arabic, and the populations are overwhelming of the Muslim traditions (Shi’ite in particular).

That internal consistency constrasts sharply with the previously dominant regions of the world, the USA, USSR, and Europe. In those areas, populations are predominantly of Christian heritage, even if not actively religious. But even more dramatic is the tremendous variety of languages across the regions prominent in the 20th and 19th centuries. Even the written alphabets vary considerably, ranging from Russian with Cyrillic characters to vowels with a variety of complex accent marks across Europe.

If the USA and USSR had a more harmonious heritage and a common language, perhaps they would have remained allied beyond the 1940s. What if the advancing oil-rich Middle Eastern countries unite their influence under their common language and cultural heritage? Consider further that the USSR and Japan (another major economic force) deteriorated quickly as of the late 1980s. More recently, the USA, UK, and EU have also been reeling economically, perhaps heading for the same fate as Japan and the USSR.

Notice also the increasing criticism by the West toward Islam. Islam is not only a prominent part of the Middle Eastern nations, but also of the emerging economic powers of India, Indonesia, Malaysia, and so on. Should Westerners be concerned about the rising economic influence of the growing Islamic populations of the world?

The West is de-stabilizing economically and internal tensions are escalating. There is conflict between Greeks wanting to be bailed out by Germans, riots within italy and Mexico, and new animosity between political parties in the USA. At the same time, there is also a growing religious bias that is reminiscent of the beginnings of the Spanish Inquisition against the Muslims (or the Nazi crusades against the Jews). Is that all a coincidence?

Consider the issue of the treatment of women in Islamic countries. In some countries, it is about the same as it has been for quite a while. In other Muslim countries, treatment of women has shifted toward equality.

However, only recently (as distinct from in the 1930s or 1950s when this issue was ignored), Westerners are more frequently making critical references to the treatment of women in certain parts of the Middle East in particular. Is there much criticism of the treatment of women in Asian sweatshops? Walmart shoppers do not ask about the treatment of the garment makers much, yet the treatment of women in the Middle East may suddenly emerge as a target of scorn and moral outrage.

Could it be that the oil reserves of the Middle Easterners are attracting more and

Traditional definition of the Middle East G8 d...

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more attention from Americans and Europeans and Russians? Could it be that some of that attention is openly belligerent or at least condemning (“passive aggressive”)? Could there be new fear about cultural differences that simply were not relevant for the USA or USSR in 1930 or 1950, when those were the oil-rich nations on which importers like Germany and Japan depended for exports? Note that German and Japanese belligerence eventually was targeted at the USSR and USA, who were, by the 1940s, the world’s new emerging superpowers as “oil-producing and exporting countries.”

Are Westerners now organizing their attention on justifications for exerting military influence in the Middle East? In the mid-20th century, the US championed the Shah of Iran, marking a new level of direct involvement in Middle Estern politics by the USA. Western support for the formation of Israel is also distinctive, as well as lesser-known involvements such as in the case of the island of Diego Garcia. More openly admitted was the so-called civil war in Afghanistan in the 1980s, which was largely a conflict between the USSR and USA.

Western countries today may be overly dependent on imports of oil. If these western countries implode economically in debt crises (similar to that of Japan and the USSR by the early 1990s), will suburban populations begin to focus more on access to oil? Will westerners divide against themselves politically? Will they realize that cheap Chinese imports (from sweatshops or otherwise) are insignificant practically when compared to access to oil?


Will the baby boomers realize that oil is far more valuable to them than gold or any paper contracts, including any contracts relating to future possibilities involving gold or real estate or even oil itself? Thinking back to the oil shortages of 1973, would you rather have a paper coupon that might be redeemable for a gallon of gasoline… or the actual gallon of gasoline?

P.S. Note that the above is something of a follow-up to my article of five years ago in which I connected the idea of US dependence on foreign oil imports to a coming spike in oil prices and associated de-stabilizing of the US economy (which was headline news by 2008).
Navigating the New Economy, Lesson 1: “Worth its Weight in OIL”




J.R. Fibonacci
September 9th, 2005

That article was further cited in an MBA thesis by a Columbia University student:

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