I received both books today, The Coming Economic Collapse by Stephen Leeb, and The Great Bubble Boom, by Harry S. Dent. I haven't read all of these volumes, but I have read enough to come with some conclusions. I believe Leeb more than I do Dent.
Stephen Leeb believes that peak oil will profoundly affect our society. He shows this more than in his earlier book The Oil Factor, and in some cases suggests we could be nearing an end to our civilization, although he says this need not happen if we take the right actions. Like other peak oil people, he says that oil prices will continue to rise for the foreseeable future. This happened before, in the 1970s, and he uses that decade as a model for what is coming up in the next few years - the Double Zeroes and the Teens. During that time, inflation threatened to get out of hand. It was stopped by Fed chairman Paul Voelker raising interest rates so high that they suppressed inflation, and eventually caused things to come back to low inflation. Mr. Leeb notes this can't happen this time because of huge consumer debt. If Bernacke were to try that, housing buyers would disappear, people would not be able to pay their adjustable rate mortgages, and house prices would plummet, taking stocks and the economy with it. So the only thing left is to let inflation rage. This implies that we could be heading towards million-dollar homes, then million-dollar cars, then million-dollar computers and so forth, and I hope we aren't heading towards 1923 Germany.
Leeb says that wind holds the most promise to replacing oil in our society; he doesn't mention the idea of converting coal to gasoline, as in his earlier book, I guess because he says that wind can be used to electrolyze water into hydrogen for fuel for fuel-cell vehicles. Among the investments that should be shunned are those that did poorly in the 1970s: cash, bonds, stocks, and small-cap stocks (although the latter did well in the 1970s). Instead, he says we should invest in oil, gold, real estate, China, India, and alternative energy. It is hard to follow such a strategy now because it seems that oil and gold have a tendency to drop in price as of late. But he says we should invest in these things.
Harry Dent did not do as well with his Bubble Boom. He uses generational theory and the upcoming Fourth Turning for his predictions. He says that a booming market, to the extent of Dow 40,000, will come in the next few years, by 2010. Then he says the Mother of all Depressions will occur, because the Baby Boom generation will start retiring and require support. He even describes a mini-history of 2010-2024 and beyond. I read through this and it seems like a repeat of the Great Depression and World War II. He even calls for the election of an FDR-like president in 2012. If he is talking about a Crisis President, I think this president is more likely to show in 2008, and I made a claim on Beyond Opinion that this president could be Al Gore. He does present a graph in which there is an uncanny resemblance in the Dow of 1921+ and the Dow of 2002+, but many other authors have found such similarities, and they haven't panned out. The truth is that no two Fourth Turnings are the same. The one before the Great Depression and World War II was completely unlike those crises. Instead of dragging on for 16 years or so, this one, the Civil War, was over in only 4 years, and it did not involve much economic dislocation, at least for the North. Dent makes the same mistake as President Bush - overemphasizing terrorism and ignoring peak oil. Neither Leeb nor Dent mention global warming.
Harry Dent seems to completely ignore peak oil, and assumes we are going to have an adequate supply, and gives brief mention to the Athabasca tar sands in Canada, although that oil takes a lot of energy to get from the tar. He devotes an introduction to peak oil, and he suggests that prices are going back to under $40 a barrel and that oil and oil stocks are about to tumble. I don't think so. The problem is not some trick or some technicality in a figment of the imagination such as a stock's price, but is a genuine supply problem with the stuff. His reading is fascinating in places, however, and he demonstrates well the concept of the S-curve, which is also called the logistic curve. Dent applies this curve to automobiles, computers, and cellular phones. He says that we are 90% into the Internet S-Curve. I think he should apply his S-curve concept to cumulative oil production. He will find that we are near the 50% mark on that curve; i.e., nearing peak production. His recommendations are for stocks of all kinds until 2010, and then invest in money market funds and the like. Leeb says those investments will lose purchasing power to inflation.
I asked both of these men about the theory of the other. Leeb does say in his book that retirement of baby boomers (a prediction of the Fourth Turning) will drag the economy, but that peak oil is the more serious problem. A spokesman of his said that baby boomers will continue to find work into their later years and so that will not be a problem, unless peak oil makes it one. However, as we have seen, Dent does not mention peak oil at all, and actually says that oil prices are a bubble and are about to tumble.
Which am I to believe more? I'd go along with Leeb. The Fourth Turning is an interesting concept, but still merely an abstract concept, but oil is a real substance. Either way, we could be in for some hard times, and I believe that the Fourth Turning crisis will center on finding how to continue civilization without fossil fuels.
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