Thursday, July 3, 2008

Going..........going...................dying


The Slow Death of the American Lifestyle

By Kevin Kerr
The world keeps turning and the world's natural resources keep getting used up. Despite this elementary fact, the "experts" continue to debate whether or not resources are running low. But the evidence is pretty clear, at least to this trader.
In the past year, we have seen prices explode in the oil and agriculture markets. And this could be just the beginning of the rally, not the end, as some would have you believe. Personally, I think we are about halfway to the new top for many commodities. That means $200 oil (easily) and gold at $1,500-2,000. The agriculture markets have even further to go.
Key commodities are becoming more and more scarce. So we can expect to see more suffering in the poorest countries first. Then the economic impact will work its way up the food chain (no pun intended).
The facts are fairly grim if we look at them closely. But very few Americans understand the ramifications.
In her famous book On Death and Dying, Elisabeth Kubler-Ross describes the stages of grief:
Denial: "It can't be happening"
Anger: "Why me? It's not fair"
Bargaining: "Just let me live to see my children graduate"
Depression: "I'm so sad, why bother with anything?"
Acceptance: "It's going to be OK."

The American public is going through the stages of grief right now. Rising prices are just a market-based signal that we are losing our economic and resource abundance. As the American Dream fades away, it's like a death in the family.
Right now, I think we are between the stages of denial and anger. Ask yourself these questions: What do you think when you pull up to the fuel pump and have to pay $4 for a gallon of regular gas, or nearly $5 for a gallon of diesel? Or how about when you go to the supermarket and have to pay $4 for a gallon of "store brand" milk, or the same price for a loaf of "store brand" bread? Are your emotions between disbelief and anger? Are you saying to yourself, "Hey, what the heck is going on?" (I'm cleaning it up a bit because this is a family-friendly publication.)
No commodity has hit Americans in the wallet harder than energy. Over the last couple of years, the prices of oil and gasoline have more than doubled. But even with these dramatic price increases, Americans continue to drive their cars. We have seen a very small decrease in gasoline usage - only about 1% or so.
We still like to drive our big SUVs. We still drive alone to work. Most people rarely take public transportation (if there is any). And we love to run our air conditioners full blast while watching the documentaries on global warming and dying polar bears on our 62-inch plasma TVs.
We complain. But we are still in denial. "This can't really be happening," we tell ourselves. "The price or gasoline will surely be dropping back below $3.00 a gallon."
Yes, we like to grumble when we fill up those big SUVs, mostly because it's easier to complain than make the tough changes that are needed. We feel entitled to keep living as we do. Hey, after all, we've earned it. Right? Rather than make difficult choices, we are in that denial stage and buy the line from the government and media that all is well.
The facts and the fiction often get mixed up when discussing the issue of "Peak Everything." Take the surging price of crude oil. Some people (including a lot of politicians) want to blame the traders and speculators. A lot of people blame OPEC. The list of culprits goes on ad infinitum.
The fact remains that it's not just one reason or another that we are in this energy disaster; it's actually all of these reasons and others. It's a culmination of many years of poor energy policy, shortsighted planning (if you can even call it planning) and an overdose of arrogance that only superpowers can have.
It's like a football team saying, "We're No. 1 always will be." So the team stops training hard. Players quit working out and coming to practice. The coaches just relax and forget about recruiting or developing new talent. Nobody designs new plays or bothers to scout the opponents to see what they are up to. And then the team expects to go out into the world and bring home the trophy every year. "Hey, we deserve it. Right?"
Or go back to the analogy of the Titanic. The ship was state of the art. It was not "supposed" to be able to sink. But now as the water rushes in and the ship is dropping lower and lower into the sea, the cold water is hitting us all in the face. Now our lawmakers are scrambling to plug the holes, and it's not working. The smart people (or maybe they were just lucky) are already in the lifeboats.
Only time will tell if the U.S. can actually move into the acceptance stage. But in the meantime, commodities will continue to dwindle.
And as this happens, there will be incredible opportunities to profit as investors. These opportunities will abound, as they always do when stupid decisions are being made.

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