Bob Hawes |
Tuesday, 1 July 2008 6:00 AM |
As an economist, or at least a graduate with an economics degree, I find it both fascinating and disorienting to absorb the plethora of material professing and prescribing the “certainties” in such “uncertain” times in relation to the current local and world economic circumstances.
In other words, at a time when the economic signals in many arenas range from robust to basket-case, there’s a variety of inspirational and illuminating viewpoints espousing bad, good or indifferent predictions.
There’s a plethora of angles and divergent subject matter to digest. The experts simultaneously and differentially postulate why this happened and what we can expect in the future.
Yes folks, it’s time to get out the dart board and study up on your horoscope!
On a recent holiday I read a book which revealed an interesting perspective on the economic discussion.
The book is by Stephen Leeb, The Coming Economic Collapse – How You Can Thrive When Oil Costs $200 a Barrel, I know, it’s not a title that would entice many as a holiday read. Leeb is a US-based investment adviser with an economics degree, a Masters in mathematics and a PhD in psychology. He also authored The Oil Factor, a book that explores the consequences of America’s dependency on oil.
Written in early 2004, The Oil Factor boldly predicted that oil would reach $100 a barrel by the end of this decade. At the time, the forecast earned Leeb ridicule. He was patronised by a swag of investment commentators and students of economic form. Well, oil has zoomed past $130 a barrel (May 2008). Whilst some suggested Leeb was outrageous, with hindsight, it appears he is a conservative.
In his latest book Leeb notes, “It appears that $200 a barrel by the end of the decade is entirely probable.” Won’t that be fun filling the tank in the 4WDs (SUV if you’re American) and the big V8s!
Leeb “models” how $200 a barrel will influence investing and living in the US. Some of his predictions are not pretty and the property industry is not immune from trouble either.
However, it was not only the ‘economics’ in The Coming Economic Collapse that I found gripping. It was also Leeb’s theory on why predictions and forecasts like that in The Oil Factor are ignored and dismissed as useless diatribe within influential forums like the leading investment houses and government think-tanks until it’s too late.
Leeb singles out conformity, authority and groupthink as the evil agents, the influences of the behavioural responses that we inevitably generate and witness. He cites a mix of past economic and societal experiences that highlight how these non-tangible qualities can play such a huge part in shaping the ‘now’ and ‘what’s coming’ contexts. For example, Leeb points to the herd mentality that enveloped so many in the NASDAQ tech stocks boom of the late 1990s as typical and destined to be repeated. He believes there’s still too much of this groupthink behavior about and this will be to our peril.
Of course, like any good adviser, Leeb prescribes some investment remedies that you’ll have to read the book to profit from.
Serious stuff.
On the same holiday, I watched the movie No County for Old Men. One character, Ellis, had this great line; “this country's hard on people, you can't stop what's coming, it ain't all waiting on you”.
Those who have seen the movie will understand why I would prefer Leeb’s plight compared to that scripted and directed by the Coen brothers of many characters in the movie.
In economics, like life, who do you believe to judge on what’s coming? Which road do you go down? Whose advice do you trust or do you make your own assessment and decisions? History will tell us who’s right.
Anyone interested in buying a diesel?
Bow Hawes is development partner at Buildev and chairs the Property Council of Australia’s Hunter Chapter.
Bob Hawes |
Tuesday, 1 July 2008 6:00 AM |
