Don't think of any of this as bad news.  Think of it as a change in the world from which you will either profit or lose.

The 20th century taught us that "business as usual" actually means constant change.  Can you think of any big change that happened in the 20th century?  WW1, Wall Street boom and Crash followed by the Depression of the 1930's, WW2, technology gave us commercial radio, television, the Internet, microcomputers, motor cars came to dominate our cities, we came close to nuclear annihilation several times, the airplane, terrorism, de-colonization etc.

Every time something changes there are winners and losers.  Even things like the wars and the Depression while bringing terrible loss to millions of people it brought opportunity to those who were well placed to profit from it.  If "Business as usual" really means constant change the best you can do is be prepared and not get caught on the wrong side of it.  Profit where you can.

These are the Megatrends I believe are coming our way:

Money printing by governments.   Run away inflation causes a collapse in currency values.  Do you think the US Government is going to raise the $3Trillion needed for the bailouts from taxes?  No they are going to print it.

 Falling Western wages (in real or nominal terms) rising Chinese and other wages. 

Oil supply and price.   Peak oil.

http://cc.pubco.net/www.valcent.net/i/misc/Vertigro/index.html

Loss of privacy and personal freedom.  The terrorists are not much of a threat to you.  The chances of being killed in a car accident are thousands of times higher than your chances of being killed by a terrorist.  The danger is the things we will accept, the loss if freedom and privacy we will accept in the name of preventing terrorism.

Sydney will change character to a New York style population density.  Lots of medium to high rise along railway corridors.
Ageing population puts demand on medical system.  

Global warming is not caused by CO2.  Check out:   http://joannenova.com.au/  for some startling facts.  

I recently sat down with some friends where were either professional investors or equity analysts in the finance industry.  We discussed the property boom in Australia and the reasons for it.  Here are the reasons we can up with:

Out of all the factors above the increase in money supply is the elephant in the room.  The Government can print as much money as they like then manipulate CPI figures to that they fool us into thinking inflation is still low.  If you are trying to buy a house, driving a car or shopping at a major supermarket then you can't believe the inflation figures claimed by the Government are real.

If you need any proof of this have a look at the increase in the M3 money supply figures on the Reserve Bank's web site.  You will see that the money supply increased by 18% in 2007.

There are some events on the financial horizon that will instigate an economic down turn but none are greater than the energy crisis the world is going to face in the next decade and beyond.  The decline in oil production will really start to bite in 2012.

When we put these four facts together with the laws of supply and demand we then are facing exponential rises in the price of oil. Several sources have forecast that the oil price will double every 4 years in the foreseeable future.

How long will it take rising oil prices to make the cost of filling an average 65 litre petrol tank equal to one week's average wage?  You have to make lots of assumptions to do the calculation but I am guestimateing 2020 but think this could be conservative.  If it takes a week's wages to fill the car you won't be driving to work.

At this rate it won’t take long before homes without reasonable access to public transport start losing value. Cars with high fuel consumption will become too expensive to drive and difficult to sell. Flying will become very expensive. (I won’t be investing in airlines, toll ways or the trucking industry.) The oil price component in goods and services ranging from food to construction will cause substantial price rises.

It will take decades for the mal-investment in infrastructure that depends on cheap oil to be written off as the new economic environment reshapes our cities and our lives.  Some cities will have to be reengineered from dormitory suburbs and business centres to a more European approach of filling the City with mixed residential, retail, commercial and light industry.  Remote access technology like Citrix and high bandwidth broadband will become very useful.  We will see a lot more people working from home and managers will learn to manage remote workers to ensure KPI's are met.

Don’t just think about oil in terms of cars and aircraft, an amazing amount of oil is consumed to get bread on the table, from farm machinery used to sow and harvest the wheat including the pesticides used to protect it from pests.

Think there is an easy way out?

Certainly bio-diesel can be made from vegetable oil and there are other alternative fuels. However all of these are more expensive than mineral oil and can’t be produced in sufficient quantities to replace mineral oil.  An area the size of Africa would need to planted with bio-fuel crops to meet the current fuel demands of the USA. Then there are the needs of Europe, China, India, South America etc.

Though algae production could be a real solution to peak oil.  Check this out:

http://cc.pubco.net/www.valcent.net/i/misc/Vertigro/index.html 

But government and business has to get on to alternative energy now or it will end up being too little too late.

The biggest non-energy drivers towards depression are: 

The efforts by the Federal Reserve Bank and the Plunge Protection Team to protect the economy and financial markets from natural contractions have created imbalances in the systems that will result in a much larger contraction when they do eventually lose control. Inevitably they will lose control because the increasing size of the imbalances they are creating must eventually overwhelm them.

The derivatives market is bigger than ever before, much larger than the physical market, and is a “time bomb” for the economy. The world's most successful investor Warren Buffet wrote in his 2002 annual report for Berkshire Hathaway. "Derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal."

Then there is the retirement of the baby boom generation as they sell their investments to reduce leverage and provide retirement income. They will also go from being productive people at the height of their careers to being unproductive consumers. With rising life expectancies the baby boom generation will be in retirement for longer than previous generations while they enjoy their golden years and draw on pensions. (In my opinion, any baby boomer who thinks s/he is going to get a decent pension from the Government is delusional).

Note that China will have an even bigger problem than us with an ageing population as their one child policy has created an even bigger imbalance in their population than the baby boom did in ours. Think of that applied over 2 or 3 generations, one child is the only offspring of 2 parents who were the only offspring of 4 grandparents.

This article is full of assertions and unsubstantiated claims. This is a very complex subject but the article has been written in a short accessible style. If it were 20 pages of explanation and footnotes then few people would read it. If this article rings true to you then you should do your own research. 

Why not start by doing a Google search on: Plunge Protection Team,  or  Peak Oil
Find out how the “hedonic index” is used to the construction of the CPI.
Have a look at the growth of M3 money supply figures in the USA and Australia was over the last year and then ask yourself what the definition of inflation is.

When cash is inflating and people are panicking remember that the only money that has kept its value and purchasing power for the last 5,000 years is gold.  Nothing is as safe as gold in a crisis.  If the gold price is going up then so do the profits of gold mining companies.  With that in mind I have invested ALL my money in gold shares.  Click on the hyperlink below to see what I have invested in: 

CLICK ON THIS TEXT FOR HYPERLINK

My number one favourite is:   Citigold (CTO)

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