Investing in precious metals 101

Warren Buffett versus the Soccer Moms

Login or register to post comments Last Post 4242 reads   17 posts
Viewing 10 posts - 1 through 10 (of 17 total)
  • Sat, Jan 02, 2010 - 12:56pm

    #1

    drbubb

    Status Member (Offline)

    Joined: Oct 08 2008

    Posts: 10

    count placeholder

    Warren Buffett versus the Soccer Moms

(This short article of mine was recently published on Financial Sense, and I thought it might be of interest here too. I suppose that I also want to use it to introduce myself.  I was an old lurker, and am now a new poster.)

Warren Buffett versus the Soccer Moms

US Economy to be rebuilt around rail links?

by Michael Hampton, AKA Dr.Bubb

“If you need a car to live there, Do not buy there!” – how long before we hear that advice across America?

Last week Warren Buffett’s Bershire Hathaway invested $44 billion in a railroad. This represented BH’s largest investment yet. Mr. Buffett characterized it as a “bet on America’s future.” Much of the investment is his own money and so Mr. Buffett must be right about the rationale. But if the investment is a “bet on America”, it is a bet on a different sort America than we have today. Dig deeper and you will see that Buffett is betting on higher energy prices and a different transport focus.

Approximately half of Americans live in the suburbs. In fact, this living arrangement, which has received so many trillions of investment from Americans over the past 8 or 10 decades, can be seen as a huge bet on cheap oil prices. This is a bet that many Americans may have feared they were losing when oil prices shot up to $146 last year, and gasoline pushed through $4. Oil prices fell back 12 months ago, only to start rising again when the economy stopped its freefall in 2009. People should be able to see, that if we do have an ongoing recovery, then eventually a recovery will bring back higher oil. Thinking suburbanites must be worried, and the deeper thinking ones, may realize that Warren Buffett’s huge investment is a warning that the days of cheap oil are truly ending.

“We live here for our children,” is a response that you are likely to hear from many US suburbanites if you ask why they live so far from the cities, and maybe with a long drive to their jobs too. Giving a lawn and space to young children, may seem like the right and caring thing to do, and it involves various sacrifices on the part of the parents, especially the ones who commute. A typical pattern might be where one or both partners drive long distances to work, dependent on a car and regular gasoline purchases for transport to the office. Where there is “a full time Mom,” her life maybe be dedicated to chauffeuring her children to school, and various other activities. Hence, she calls herself a “soccer mom”, and she may drive an SUV or some other vehicle large enough for herself and her children. This is not the sort of America that Warren Buffett is betting upon. In fact, as James Howard Kunstler has put it, “the American suburban living arrangement has no future,” It seems that Buffett agrees. Cars and trucks will be the vehicles that lose out to railroads.

Ironically, those who live in the suburbans may have done a disservice to their children and their grandchildren. An America addicted to foreign oil, is an America with a bleak future. The US now imports almost 2/3rds of its oil requirement, with most of that used for transportation fuel. And that addiction is not going to go away as long as Americans live in the suburbs and commute by car. For the first time in history, the number miles driven fell in 2008. So a recession may seem like a partial cure for the addiction. But we live in a world of global oil demand. The US has 76 times as many cars per capita as China. But new car sales in China are expected to be 29,000 cars per day in 2009, which surpasses the US by about 10%. India, too is showing a big increase in car sales; up 5% to an expected 3,300 cars per day. Once they have a car, the new drivers will need fuel for it, and oil consumption in emerging countries will grow, whatever happens in the US. In a Post-Peak oil world, we cannot afford even one oil consumer on America’s scale, let alone two or three.

The real nightmare scenario for America will come when the oil price rises as the dollar falls. A collapse in the dollar, is inevitable given the rate at which America is borrowing and spending money from overseas creditors. When the dollar collapse happens, the dollar oil price is going to go much higher. Knowledgeable observers like Matthew Simmons have spoken about $400 oil and $10 a gallon gasoline prices.

Many companies are looking for alternative ways for powering the auto fleet. Hybrids may help, and so may electric cars, but that is not going to change the fact that car owners in other countries will keep pushing the oil price up. The real long term solution is to change where Americans live, and severely curtail the amount of driving that they do. This will mean an end to many American suburbs, especially those in the far away “outer rings.” Cities and small town will need to densify around their inner cores, and around their rail hubs.

That is the real bet that Warren Buffet has made. He has bet against the Soccer Moms. The suburban car users had better see that they and their families are losing the bet on cheap oil. The sooner they begin to examine their lives, where they live, and how dependent they are on a scarce global resource, and begin to make the dramatic adjustments that are needed, the greater the chance they and their children will survive the inevitable changes that Warren Buffett has so clearly signaled by his largest ever investment.

  • Sat, Jan 02, 2010 - 02:39pm

    #2
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1612

    count placeholder

    Re: Warren Buffett versus the Soccer Moms

Nicely done, DrBubb.  Esp this:

“The US has 76 times as many cars per capita as China. But new car sales in China are expected to be 29,000 cars per day in 2009, which surpasses the US by about 10%. India, too is showing a big increase in car sales; up 5% to an expected 3,300 cars per day. Once they have a car, the new drivers will need fuel for it, and oil consumption in emerging countries will grow, whatever happens in the US. In a Post-Peak oil world, we cannot afford even one oil consumer on America’s scale, let alone two or three.”

This is the kind of point (clearly made) that can penetrate the heads of regular folks, even if they don’t know of/believe in Peak Oil.  The sheer numbers of extra cars on those roads (in China/India [and by extension, Brasil etc.]) will put price pressure on oil — not to mention all the other oil they would use (or want to use) to pursue a standard of living more like ours.   

And welcome to the (non-lurking) party!

Viva — Sager

  • Sun, Jan 03, 2010 - 01:07am

    #4
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1612

    count placeholder

    Re: Warren Buffett versus the Soccer Moms

Drbubb asks:

The issue for this website is:  How do we the message out to those who are still in denial, and would rather not know.

I’m becoming increasingly convinced that the way to spread the word is to be well informed on all related topics as much as we can so as to be prepared to amicably engage in discussion if the opportunity presents itself, and to subtly spark the  discussion if it doesn’t. Therefore I would tend to disagree that your article, while “preaching to the choir”, is not needed. It would, IMHO reinforce, and flesh out the topic for us as well as provide additional perspective. So bring it on.

By the way, most folks I present these topics to are not so much in denial as ignorance. Most reactions I get are acknowledgement of a problem, then a moving on with their life. Therefore I think a repetitive approach might be useful in that if folks get the same alarm sounding from different sources, eventually through osmosis, they might come to a recognition of greater awareness and urgency. That’s the approach I’m trying presently. It has been only marginaly successful, but no worse than anything else I’ve seen or heard being tried.

  • Sun, Jan 03, 2010 - 01:08am

    #3
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1612

    count placeholder

    Re: Warren Buffett versus the Soccer Moms

Thanks, Sager.

No doubt, such an article is not really needed here – It is like “preaching to the converted”, a bit of a wasted effort.

The issue for readers on this website is:  How do we the message out to those who are still in denial, and would rather not know.  

I would have wanted to see a large gasoline tax imposed in the US decades ago.  It might have saved us from investing trillions of dollars in absurd things like: McMansions in the outer ring suburbs.  Some of these homes, possibly most of them, will wind up as farmhouses, slums, or firewood.  The resources wasted in building them, and the debt expended in financing them… represent a very sad waste of wealth and scarce material.  The writedowns hit the reckless individuals, banks, and even the US as a whole.

The changes that are needed look obvious, once you begin to understand the problem, but the political consensus needed to tackle “the dilemma” in an adult fashion, is still beyond us.  How can we change that?

  • Sun, Jan 03, 2010 - 01:46am

    #5
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1612

    count placeholder

    Re: Warren Buffett versus the Soccer Moms

“The issue for this website is:  How do we the message out to those who are still in denial, and would rather not know.”

The people I speak with will give a nod of the head, and a grunt to indicate that they heard me.  I think that most people only want to deal with what is in front of their face, and they don’t really want things to change.

Has anyone tried contacting their congresspersons?

btw I am a soccer mom.

  • Sun, Jan 03, 2010 - 02:11am

    #6
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1612

    count placeholder

    Re: Warren Buffett versus the Soccer Moms

This thread is morphing into zealotry, of an almost religious nature. I try to convince few, learning the futile effort is negative energy discharge.

robie,

an acute “I” myers-briggs

  • Sun, Jan 03, 2010 - 02:25am

    #7
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1612

    count placeholder

    Re: Warren Buffett versus the Soccer Moms

“I think a repetitive approach might be useful in that if folks get the same alarm sounding from different sources, eventually through osmosis, they might come to a recognition of greater awareness and urgency.”

The thing the communicates the message best … is a SHOCK.  

We got a shock from $146 Oil prices in mid-2008. But when prices fell back down, people’s sense of urgency faded.  Today we are now dealing with another shock – the weak global economy.  Many wanted someone or something to save them from job losses, or reduced wealth.  They cried came out to government: “Do something!”  And the politicians responded, with a huge stimulus program.  Many people now think, we are headed “back to normal.”  And they are switching off again.  Complacent, they are now feeling that they will need to do nothing to change their lives, and the way they waste resources.  They want to go on, just as the always have done, living like cheap oil and cheap resources, and a stable climate would last forever.

The sad truth is this : For most, only a Big Shock (!) communicates the message.  But if the majority wait for the really final big shock, before considering to change their lives – it will be too late.  Too late for them, and for most of the people on our planet. When the majority wakes up, they will find that they are trapped, and there will be very few choices left to them.  Only if we can get enough people onboard before it is too late, can we forge an consensus to make bigger and more meaningful changes.

Something I personally would like to see is higher taxes on oil, carbon, and maybe even on water.  Higher prices is one thing that would surely change behavior.  If people have to pay more for resources, they will use them more carefully, with less waste.

I have founded a website, called GreenEnergyInvestors dotcom.  It has over 2,000 members.  Most are based in the UK, where I used to live.  We discuss many of the same issues, that you discuss on this website.  In fact, the Chris Martenson course has been recommended by many of our posters.  And that is what led me to register on this site over 12 months ago.

When I mention the idea of raising taxes on energy and other resources on GEI, I get a common reaction: “Don’t do that!  Governments only waste money.  A higher tax would put more money in the hands of government, and that’s a bad idea.”  This comes from people who are mostly sympathetic to the idea of Peak oil.  When I tell them, well look what has already happened, gasoline taxes were raised in Europe to much higher levels years ago, and the result is that Europe uses much less oil: 9 barrels per annum per capita, versus 27 barrels in the US.  This comment usually elicits silence.  Or a few say, doesnt that prove the point – governments will just waste the money.  European governments are at least as wasteful with tax revenues as is the US government.

This fear of government waste is one of the problems that has doomed carbon reform efforts in Copenhagen.  People were afraid that governments would just waste the tax revenues, or that Cap-and-Trade revenues would wind up in the pockets of investment banks like Goldman Sachs.  No one wants to see that.  Now there is serious talk about “cap and dividend” as an alternative.  This is more appealing to me also.  Let the heavy users pay more, and split the “cap” revenue with everyone.  The wasteful reward the virtuous.  And maybe that will work.  But people remain suspicious of any system where revenues pass through sticky fingers of governments, and so they should be.  A program like that would need to be very skillfully legislated, to keep the voracious appetites of near-bankrupt governments from grabbing it all.

Perhaps there is another way, which can complement the larger efforts needed to seek political remedies.

Many here are struggling to “Get the message out, before it is too late” within their own communities.   Such efforts are valiant and valuable.  But I truly like the idea that we can change our own behavior, and then lead by example.  And that idea is what has led me back to this website.  

I am truly impressed by the example that the Martensons have provided with their own lives, the way that they live within a sustainable community.  And I think that many others here are doing the same.  (Listening to some podcasts on the TwoBeersWithSteve website has brought that home to me: Well done, Steve!)

Let’s join forces: you and I, GEI and the CM website, and others here and around both sites.  We can get the word out in 2010 in fresh ways: new podcasts, new videos, new courses and events.  There’s much to be done, and not so much precious time to do it.  2010 can be a great year for positive and bright changes in our lives, even as the global economy drifts towards a darker future.

  • Sun, Jan 03, 2010 - 02:31am

    #8
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1612

    count placeholder

    Re: Warren Buffett versus the Soccer Moms

[quote=fiatagogo]

Has anyone tried contacting their congresspersons?

btw I am a soccer mom.[/quote]

Not so easy for me, since I live in Hong Kong, where a lower carbon and energy footprint is easier to sustain.

BTW, I have no problem with Soccer Moms, per se.  They do not all drive SUVs.

However, I would be interested in your reaction to this comment within the article:

“We live here for our children,” is a response that you are likely to hear from many US suburbanites if you ask why they live so far from the cities, and maybe with a long drive to their jobs too. Giving a lawn and space to young children, may seem like the right and caring thing to do…

Ironically, those who live in the suburbans may have done a disservice to their children and their grandchildren. An America addicted to foreign oil, is an America with a bleak future.”

  • Sun, Jan 03, 2010 - 02:51am

    #9
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1612

    count placeholder

    Re: Warren Buffett versus the Soccer Moms

 

People were afraid that governments would just waste the tax revenues, or that Cap-and-Trade revenues would wind up in the pockets of investment banks like Goldman Sachs.

Gee, why would anybody think that?

  • Sun, Jan 03, 2010 - 03:09am

    #10
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1612

    count placeholder

    Re: Warren Buffett versus the Soccer Moms

I’m thinking as we move into the future, the population is only going to get bigger. What better way to transport people than mass transit system like a railroad or a rail system. Maybe thats the thinking behind investing in a railroad. This may be especially true in a metropolitan when there are too many cars and traffic which is happening here in southern Calif where I live.

But this post peak oil thing you guys keep talking about, when can we really expect this to affect us? Again, where I live the prices have gone up, but then down. Any idea when this peak oil thing will really affecting us? I don’t see it or feel it one bit at the moment.

Viewing 10 posts - 1 through 10 (of 17 total)

Login or Register to post comments