Option Investor
Market Updates

All Over But The Counting

Printer friendly version

Over $400 million dollars were spent in search of your vote. Thousands of TV ads, millions of banners, yard signs and decals were printed. Now the market is waiting for the outcome and odds are good we will see a sell off regardless of who wins. Unfortunately the winner will have inherited the biggest problem in our lifetime.

With Obama ahead in the polls by 4-8 points depending on which poll you read and the Bradley factor worth about 5 points the race is a tossup. It will all boil down to the electoral votes as the country picks a new president on Tuesday.

Absentee and early voting have been the highest in history and pollsters tell us that Tuesday's voters will set historic records in the number of votes cast. Whatever the outcome the result will be historic. Either the first black president will be elected or the largest favorite in decades will be defeated by the uncounted masses.

The polls tell us that "likely voters" will elect person X. However when it all comes down to the ballot box those likely voters are much less likely to actually cast a ballot for that favored candidate. Lines are historically long, I think I will pass. Obama is so far ahead he does not need my vote, I think I will pass. McCain is so far behind my vote won't help, I am not going to fight the crowds for a losing candidate. There are so many reasons why likely voters turn out to be no shows I don't have space for it in this article.

Obama is not my candidate but then neither is McCain. I view McCain as the lesser of two evils but that is just my opinion and I am not trying to force it on anyone else. I don't want higher taxes and I don't want a trillion dollars of new government programs. Unfortunately all politicians are incapable of telling the truth and incapable of enforcing their will on Washington. When they grow a backbone and shutdown government for several days by refusing to sign some monster spending program attached to the budget they are vilified and cursed for putting so many people out of work. If they sign it into law they are cursed for spending so much money. There is no middle ground. If Obama is elected along with a filibuster proof Senate then he country will not be safe for the next 8 years. Government spending is going to soar and all types of new regulations are going to get passed. McCain might be successful in holding back the plans of a democratic majority in congress but in the long run my money is on congress. They will spend every penny they can tax out of us and there is no hope of stopping them.

This makes the election one of the most important in our lives but also one where we are almost unimportant. The republicans have made such a mess of things that any new president will have his hands full. The candidates are focused on Iraq and rolling back or making permanent the Bush tax cuts. Unfortunately those are not the biggest worry they face. They don't even realize what problem is going to reach up and bite them in then butt in a couple years with little warning. It is bigger than Al Qaeda, bigger than 9/11, bigger than a resurgent Russia. That problem is peak oil and neither candidate has a plan to escape the consequences. Peak oil is even more unpopular on the campaign trail than Iraq. Peak oil is that mythical event that 99% of Americans believe is a myth perpetuated by the oil companies so they can raise the price of oil.

Peak Oil is the point where we can no longer increase the amount of oil we pump out of the ground every day. It is not the end of oil but the end of cheap oil. Peak oil will be the biggest curse left over from prior administrations dating back to Ronald Regan. They all knew about it and several presidents actually commissioned reports on it but all decided it would not happen until after they were out of office so they elected to do nothing about it. Why worry about the future when the topic is so unpopular? Leave it for the next guy. You can bet after the oil spike to $147 this summer President Bush is thanking his lucky stars that he will be out of office for several years before the curse returns.

Neither candidate has expressed a grasp of peak oil. Other than some campaign sound bites neither candidate is paying attention to the greatest problem we have ever faced. The U.S. and the world is running on cheap oil. We consume 87 million barrels per day and increasing by approximately 1.5 mbpd each year. The time is rapidly approaching where we can no longer continue business as usual. Within months of peak oil's arrival the price of crude will skyrocket again but this time it will be permanent. How is the next president going to deal with a shortfall of 2 mbpd in the USA? That equates to 40 million gallons of gasoline per day that will not be available for consumers. Is that 10 gallons less in your tank or your neighbors tank each week? Everybody always assumes it is the other guys. Unfortunately once the shortage begins after the arrival of peak oil it will NEVER get better. There will be a gasoline shortage for the rest of our lives.

We saw a brief taste of what peak oil will look like when oil spiked to $147 last summer. Gasoline was $4.25 per gallon and there was no real shortage. It was simply a price squeeze brought on by hedgers and speculators. The peak oil shortage will be real and speculators will make it even more difficult to live with. It is going to change your life and that is a fact. You don't have to believe me today because it will still happen. You don't have to believe in gravity but knock your laptop off your desk and it will still break.

Disregard the current "reported" oil glut. It is a very temporary situation brought on by a global recession made worse by high oil prices several months ago. This recession is also a preview of the future. When gasoline prices are $5, $6 or even $8 a gallon the world is going into a steep recessionary spiral that will make today's economic weakness seem like a summer cold. Mark my words today. Before the next president leaves office we will see gasoline well over $5 a gallon and a recession many times worse than we are seeing today. It will not be because they did something wrong. At this late date there is nothing they can do. Our fate is already written in stone as the largest consumer of oil on the planet. We consume 25% of the world's oil but only have 4% of the population. Once peak oil arrives the rest of the world is not going to take kindly to our inordinate share of the worlds dwindling resources. The geological problem will only be made worse by a geopolitical problem of massive proportions as countries demand the U.S. consume less oil so that they can continue to claim their global ration of fossil fuel. It is not going to be a pretty picture and yet the candidates are sparring about who's tax cut will most benefit those on welfare and which is worse a $150,000 wardrobe or a $2 million victory celebration. Neither of the candidates has a clue and voters, most of who don't have a clue themselves, are going to vote for their favorite to bring change to Washington. Change is coming but it is not going to be from Tuesday's winner.

Jim Brown

Intraday Update Archives