Gloom Fest 2005
First they started calling me Mr. Water Shortage, now I'm labeled a "Gloom and Doomer."
Not that being a gloom and doomer is a bad thing. After all, when I was just starting out in the investment arena, I cut my teeth doing research for contrarians like Doug Casey, Bill Bonner, Adrian Day, and Gary North.
Talk about a team of downers.
And I've even spoken at conferences with Dr. Gloom himself, Marc Faber.
So you could say my gloom and doom pedigree has royal blood lines.
Look, I have to call it like I see it. And if that means telling people things they don't want to hear, so be it.
But there's more to it than that. Sure, we're faced with some very big challenges in the coming years.
Shortages. Stressed resources. Pollution. Energy conflicts. Throw in a demographic tidal wave, and we've got a real witch's brew.
And I haven't even touched on the potential of worldwide war.
Russia is sliding into a dictatorship. A virus is spreading across Europe called "Islamo-fascism." And China has a blueprint to go to war with the US. In fact, it's so serious, the CIA recently warned that the Chinese Navy is being built-up at a terrifying rate.
Let me say that long term I think mankind will survive and prosper (like it has) beyond our current ability to imagine.
Ultimately I think we'll see pollution drop to untraceable levels, while energy will become essentially free.
Water, the environment, cities, all of it will be clean as a whistle. Life spans will routinely encompass hundreds of years. Space travel will become common.
But at present, these problems exist, and in some cases they pose very real threats to the way of life we enjoy.
It's the soft, white underbelly of global socio- economics.
You've heard it before, but only in these pages.
A few quick items:
Chances are we're very near the peak of oil production. Indeed we could have already past this point, as Mr. Sourpuss himself, Matthew Simmons recently pointed out.
This past Monday, Simmons was quoted as saying "we may have already passed peak oil".
The world's largest producing oil field may be passed the point of no return.
"If Saudi Arabia have damaged their fields, accidentally or not, by overproducing them, then we may have already passed peak oil. Iran has certainly peaked, there is no way on Earth they can ever get back to their production of six million barrels per day (mbpd)."
By its nature, peak oil will only become apparent after the fact. For those you don't accept it now, it'll be too late.
But the implications either way are massive. The way of life in the entire western world, and an ever- increasing part of the emerging east, is based on a ready supply of cheap oil.
When oil spirals up to and beyond $100 per barrel, as a result of declining production, a domino effect begins. Oil is energy. Energy prices skyrocket. Everything else follows.
Yes, at some price, the market function kicks in, forestalling demand and freeing up supply. But, after peak, this is merely academic. A way of life is over.
And a backup plan? I'm not aware of one. And because of that, the shock will only be more severe.
Some enterprising power companies have begun aggressive, and very far-sighted, plans to supply future energy needs via wind, solar and other unconventional means. The primary impetus was their calculation that hydrocarbon-based energy will be far too expensive to produce on a mass scale.
So, for all of our prognosticating, where are the corresponding answers? How do we ride this out?
Well, our beat is wealth. The creation of wealth.
So the quick answer, as most readers know, is to buy resources. Oil, natural gas, coal. Looking further, we'll examine unconventional energy sources. But only when the time is right. We'll follow the capital, always with an eye toward profit.
In my mind, an unrelenting quest for investment gains-major gains-is vital to long term survival.
Because wealth, and the mobility of that wealth, will be the single greatest asset you can have in times of trouble.
Demographically speaking, we're facing a train wreck.
China, and to a lesser extent India, are gobbling up resources on an unprecedented scale. China's growth in oil demand is so robust it cannot be efficiently gauged. That country is also bidding for the lion's share of the world's copper, iron, cement and dozens of other essential materials.
Will the Chinese economy level off? Of course. Nothing grows straight up. Yet my in-country contacts tell me there's no sign of any slowdown yet.
The message is clear. The US might still have the most dominant military on Earth. But it no longer leads the world in consumption in commodities. America has 2 nations competing for the same resources, China and India.
My good friend Mike Schaefer forward me this blurb from today's Asia Times:
"Judging by the growth rate that India's auto sales recorded in 2004 and the slew of new launches that the country is poised to see this year, India seems to have finally arrived in the big league of Asian car markets, making foreign investors sit up and take notice.
With almost 24% growth in car sales in 2004, India has emerged as the fastest-growing car market in the world, outstripping China's estimated 13.7% growth last year. But India's potential looks even more promising, so much so that investment banking firm Goldman Sachs has predicted that it will have the largest number of cars by 2050.
However, at this point, India is still far behind in terms of car sales compared to other Asian giants like China, South Korea and Japan. But considering that India's auto industry really took off only as recently as 2000, it has done amazingly well.
Sales of passenger vehicles crossed the million-figure mark (1,044,597 units) in 2004, making India the fastest-growing in this segment. The growth rate of other segments was equally impressive. Sales of commercial vehicles grew at 28%, two-wheelers at 17%, three-wheelers at 13% and exports went up by 36%. Auto analysts say India's chances of staying ahead of China in terms of growth are bright, given that the Chinese government's efforts to cool down the scorching economy are likely to dampen demand there."
These are the reasons you see the Wealth Daily team constantly following raw materials, and the companies that explore for and produce them. And you've seen, no doubt, the fruits of these recommendations.
Others may not be so obvious.
In China, as well as almost everywhere else in the world (Canada is one exception), clean, readily available water is becoming scarce.
This is already the focus of major rationing and recycling efforts in China's capital city.
Most of the reservoirs near Beijing have either become polluted, or have simply dried up over the past several years. As of last year, Beijing consumed 3.4 billion cubic meters of water. Of that total, over 75% came from ground water.
Water economy has become the norm in Beijing, with shrinking supplies and a rapidly increasing population.
As a result, some newly-built public buildings and residential communities are required to have water recycling facilities. The city consumed 140 million cubic meters of recycled water last year.
This is just one of hundreds of examples why the water industry will be the growth industry for the new millennium. It's also why we're following the top- tier companies in our model portfolio.
And without water, everything dies.
The Phantom Trader
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