The PeakReady Blog

Investing in a future

• Posted by e4 on May 21st, 2008 filed in Finances

I’m finally getting to the point where I can write some things that have been floating around in my head for a while. It’s been a busy couple of months, first with a new baby, then with a new Jersey cow. But hopefully now I can get back into a little bit of a rhythm with new posts.

I was planning to write book reviews for two “peak oil investing” books. However, I forgot that I swapped one of them so I don’t have it to refer to any more. Besides which, I’m not anything close to a financial expert. But I thought I’d at least give you my impressions.

The first book is called “The Coming Economic Collapse: How to Survive and Thrive when Oil Costs $200 a Barrel” (which suddenly seems a lot closer than it did when I bought the book last year) by Stephen Leeb and Glen Strathy. The second book is “Profit from the Peak: The End of Oil and the Greatest Investment Event of the Century” by Brian Hicks and and Chris Nelder.

But before I get into the books themselves, I need to mention a few things:

- I personally wouldn’t invest in the stock market at all right now if I could avoid it. You’ve heard the saying, “A rising tide lifts all ships”? I think there’s the potential for a falling stock market to drag down all investments. Obviously some would be worse than others, but it may be the difference between losing 5% and 50%. I’d much rather put my money into self-sufficiency, community-building, debt reduction and conservation. However, I have a 401k retirement fund that I cannot withdraw money from without quitting my job. Rather than leaving that money in a few random mutual funds, I found I could move some of it to a “self-directed brokerage account” that lets me pick individual stocks of my choice. So that’s where I’m coming from.

- I will not be mentioning any specific companies or stocks here, since I have invested in some and I don’t need the SEC to show up at my door with some kind of conflict-of-interest or pump-and-dump allegations. Also, let me reiterate that I am not an expert on any of this.

The two books take different approaches to the problem of Peak Oil. The Coming Economic Collapse uses the 1970’s oil shocks as the basis of many of their conclusions. The authors examine what kinds of investments did well in that environment and look for equivalents today. They tout real estate, oil companies, precious metals, and diverse multinationals as likely winners. They do take into account some differences in today’s oil market, recommending companies that make off-shore drilling equipment and the like, but on the whole, it seemed they were assuming this oil crisis would look very much like the last. A quick look at the real estate market today should tell you that things are different now.

That said, there are a number of recommendations that seem likely to do well (at least relative to the market as a whole) as oil prices continue to climb.

The second book, Profit from the Peak, seems to be a little more organized and well thought out, at least from a peak oil perspective. The authors have covered all the bases in various peak oil debates as well as climate change, spanning topics from nuclear power, ethanol, and tar sands to wind, solar, and geothermal to carbon scrubbing, energy conservation and relocalization.

While both books talk about oil supply problems, Profit from the Peak seems to “get it” a more than The Coming Economic Collapse. The latter sees the problem primarily as high oil prices, where the former seems to take in the whole picture.

Profit from the Peak also touches more on the possible risks, concerns, and ethical considerations of the various sectors. This is an important point, because you really do need to use your brain when investing. First, there’s the fact that profit cannot be the only motive. That line of thinking is what got us into many of our current problems. Second, you should always have a good understanding of why you are investing. Blindly following advice without understanding is not a good habit. Personally, I don’t see myself investing in some companies or sectors (like tar sands or ethanol) even if profits were a certainty.

The other thing to consider is that the advice in these books was written when oil prices were far lower than they are today, and before the housing crisis was in full bloom. What was good advice then, might not still make sense. Like I said, you have to use your brain.

Both books have some interesting points and something to offer if you want or need investing advice. They have a fair amount of overlap in terms of recommendations. And they both do a decent job of outlining the underlying issues. But if you can only read one, I’d recommend Profit from the Peak.

So how have my own investments fared? Over the course of the last 12 months, I have invested at various times in 42 different securities based on what I see coming. Many are from these two books, some are from my own research and view of the future.

If you don’t believe in Peak Oil, or you don’t believe the markets are reacting to it, take a look at the numbers below. This shows the percent change since I bought each of them. These are not annualized, but actual gains:

 75.7
 65.4
 46.7
 34.7
 34.2
 30.1
 28.2
 27.4
 27.2
 26.2
 25.6
 25.6
 25.1
 24.3
 23.7
 23.5
 23.1
 22.8
 22.8
 20.0
 19.8
 18.9
 18.6
 16.0
 14.5
 14.3
 14.1
  9.9
  9.8
  8.9
  8.2
  7.4
  6.3
  5.8
  4.7
  4.2
  3.6
  3.3
  0.5
 -0.4
 -8.4
-17.6

Not bad for some guy with no real financial experience, no investment advisor, and no inside connections…

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