Does peak oil investing matter? (reply)
In a recent missive, Kurt Cobb asked whether Peak Oil investing really mattered in the long run. He says it doesn't, those who say it does don't quite grasp the issue and for the majority it doesn't matter anyway. To all of those three statements, I give a categorical "No".
The fact that I and others do say it matters is the point of this post. The statement that we do not quite grasp the issue brings us to the heart of the matter in a post-peak oil world of diminished resources and the means to acquire them.
If we begin to class such resources as those things needful to life such as heat, light, food and shelter; one may begin to feel more of a survivalist than an investor. Indeed a return to the world of the barter and batter system may weigh on people's minds more than how their stock portfolio is performing.
(Barter and Batter System: "I'll barter my resource for your resource and if I don't have a resource, I'll batter you with my gun butt until I get yours!")
However, I am sure the die-off scenario is not something on Kurt's mind, but rather something which at least makes getting our daily bread a less trivial issue than today's oil-fuelled utopia. But if we are saying that people are going to return to a 1950s or a 1930s or even a 1900s lifestyle, then investments still matter because it also mattered back in those days. Even in the 1900s there was a stock market and there was a bond market. Far less participated in it, but the fact that they existed testified to a recognisable society that got by on a lot less energy. The only debate is how gracefully we get to that state - even if it is only for a few decades.
And will all this matter to the majority whom Kurt Cobb says do not have the time or money to invest in these things? The answer is yes because they are already participating in it. Millions may not hold stocks in energy or any other asset designed to soften a Peak Oil slowdown, but they are more than likely holding such assets in their private and company pension schemes. Energy and related stocks are forming a greater part of the Dow Jones, S&P 500 and any other major international index one cares to mention. As energy becomes more scarce, this will increase the value of companies who extract energy from their surroundings as they move into the favoured top indices while stocks based on debt, leisure and so on pass them in the opposite direction. The question the average pension holder needs to ask is how Peak Oil oriented their pension fund managers are? At this point in time, I would say not enough to stop the assets they look to at retirement from dropping in value.
Which brings me to my final point. Kurt Cobb says markets are going to drop in value across the board when Peak Oil begins to grind, so what is the point? The point is this, investment determines purchasing power and purchasing power eventually buys the things which in some way contribute to life, liberty and the pursuit of happiness.
Thus, there are three choices in the strategy of Peak Oil preparedness. You can either spend all your money now in buying the items you think will help produce the energy you think you will need in the future. Or you could move that same money into investments which will give leverage in the future towards buying those self-same items when the effect of Peak Oil becomes clearer.
The third option is the via media of real life. Some will spend now on energy-conservation items but they will also move some money away from assets which will wither in a post-Peak Oil world into assets which will increase or maintain purchasing power. After all, capital has to be set aside for contingencies and no-one would willingly let their hard-earned cash stay in assets they know will depreciate rapidly.
So in conclusion, invest now in goods which will decrease energy dependency but also invest in an unwritten future through a diversity of assets which will maintain purchasing power. If anything is certain, it is that money will still exist on the other side of Hubbert's Peak and the various goods and services that it can purchase.