The Oil Factor: How Oil Controls the Economy and Your Financial Future
Author: Stephen Leeb, Donna Leeb
List Price: $24.95
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ISBN: 0446533173
Publisher: Warner Books (February, 2004)
Sales Rank: 409
Average Customer Rating: 4.71 out of 5
Customer Reviews
Rating: 5 out of 5
The peak of oil production and the fate of the world economy
There are many excellent books on the approaching peak of oil extraction (by Deffeyes, Heinberg, Goodstein, Youngquist, to name a few), but none of the books on this subject so far addressed the consequences of a permanently declining world oil production for the financial markets. The book under review is the first book to explore this topic in greater detail. In the first part, the book reviews the geological constraints underlying the coming peak of oil production (expected to hit the world within the next 6 years). A review of alternative energy sources (from natural gas and coal to fusion and solar energy) follows ending in the conclusion that no real substitute for oil seem to exist. The authors then explain why the economy needs to grow in the future in order to be able to service the huge debt loads dominating the world economies. Taken together, they conclude that inflation is the inevitable fate of the world economy. In the second part of the book, the authors discuss various investment strategies designed to take advantage of these trends. Overall this is a very important book which should be welcomed by all investors who are concerned about the long term safety of their retirement savings. I see its main value not in the specific portfolio recommendations given in the second part, but in the more general speculations (outlined in the first part of the book) about the forces shaping our economic future. The book is not perfect but I give it 5 stars mainly because this extremely important subject is not discussed in any other investment book. I am quite sure that many more books on this subject will be published in the coming years. This book is the first one in a long series of books to come.
Rating: 5 out of 5
Wake up call!
if you were worried about the USA's energy problems you probably should NOT read this book! this is a real wake-up call for our elected officials and for all you SUV drivers out there. the message is pretty simple - we're running out of oil and not doing anything about it!
Rating: 3 out of 5
What will you do when the inflation comes?
"The Oil Factor" is an economic analysis of two parts.Part 1 evaluates the effect of oil costs upon economic conditions. This analysis has determined that US economy has been a benefactor of low-cost energy, and thus has literally had the fuel for growth.
However, due to the effects of worldwide supply peaking in 2010+/-10, coupled with quickly rising demand (especially from China), the price of oil will soon start on a long uptrend that will create an inflationary cycle possibly a lot worse than the 1970s period.
Part 2 evaluates the effect that an inflationary cycle will have on asset valuations. The authors describe why this cycle will have the effect of driving down equity P/E ratios (from lower profits - the authors detail the reaons for this change). However, they also describe exactly what asset valuations will actually benefit from these changes, and offer specific recommendations of how, why, and when to adjust asset allocations.
The main component for the economic evaluation, and resulting asset protection mechanism is a formula that the authors call "the oil indicator". This indicator is intended to provide a simple and clear "positive signal" or "negative signal", and certain assets should be re-allocated at the time these indicators signal future economic results.
I believe that these authors are absolutely correct on the economics of oil, especially as to future dramatic price rises and the results of high inflation. Also, the resulting investment advice is soundly backed by economic and political analyses.
This book is an easy read, and not technically based. If you are
looking for the statistics underlying the economic analysis of oil you will not find it in this book. Rather, the authors are presenting the big picture of finished analysis.
Investors are strongly advised to read and retain this volume.
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