Perhaps an incorrect inference is made that it is too costly to repave deteriorating roads. One should realize that tearing-up and reuse of asphalt surfaces helps to keep the cost of resurfacing roads down to 10-15% increase over previous year. That’s still significant, but I contend that it is manageable.

The West knows nothing about heating food and boiling water by burning camel and cow dung. Pent-up demand for modern conveniences and for more healthy ways of living is not going to stop just because developed countries suffer a mutually-reinforcing economic recession.

As far as the foreign aversion to dollars there is no other economies/economy that can absorb it!

Oil … while demand is up there is a huge shortage of refining capacity. So the demand is for the end product but no new refineries = no new demand for oil.

I didn’t say anything, given Bryon is an old man and all, but you are absolutely right, – a severe recession will reprice oil to 70-78 in a new york minute. ~ Note too, the huge bearish overtones in today’s crude oil report:

***Crude inventories surged the most in almost four years last week

** Opec production raised production another 120,000 bbl a day in Jan,

Crude oil imports jumped 4.6% to 10.5 million barrels a day – highest since August…

“We are being overwhelmed with supply as imports rise and demand slackens,” said John Kilduff.

Do not think for one minute that Opec is not lending a helping hand here, and that the US govt is not appreciative.

They know the us consumer is stretched and the best thing to do is ensure plenty of supply to drive crude oil back to 70-78

And in the event of a slowdown in the US economy, gold returns to 800-820 and waits out the maelstrom

SuccessfulTradingTips.com

The only “sure” think in my mind right now is that equities are significantly over valued going into a recession. I currently hold QID, SRS, SKF, TWM, EEV and EFU. All double-short ETFs taking various equity slices. They are all in the money and I think they have a long profitable future as the equity markets meander their way down.

Anyway, I am not disagreeing with the author …his predictions may turn out to be spot on. I’m just saying that the 5 choices seem riskier to me than just shorting equities.

Your thoughts about complex adaptive systems are insightful.
There is an interdepencence, mutuality and interconnectedness to our global existence in ways never perceived by Darwin when fist concceived the ‘survival of the fittest’ theory.

I agree with the gravity of Byron’s concerns about both housing and credit markets. The impact on the economy is apt to be both prolonged and deep.

Readers interested in a more in depth view of the situation may wish to read some of my recent posts this past week at SuccessfulTradingTips.com

Best,
John Bougearel

Byron Wien didn’t say anything I didn’t already know (except for the insight into cotton). He just packaged it succinctly.

Literally, it keeps me awake at nights.

I was working on a PhD in computer science with a major interest in what are called complex adaptive systems. An ant colony is an example. The weather would be another, and most importantly, the world economy.

One aspect of these systems is they are complex, and our linear, deterministic modes of thinking simply do not apply. I believe their interconnectedness is one of the fundamental sources of their complex behavior.

I haven’t seen anyone begin to grasp where we might be heading in terms of the issues Byron touches on.

As an example, who would have made this connection with peak oil? Asphalt for roads comes from the bottom of the barrel of oil. It was the fraction that could not be processed economically into some higher value form – sludge if you like. Now, with the higher price for oil, more of the bitumen is being refined into higher grade product. To maintain supply, price has to rise.

Looking at the State of California’s Asphalt Price Index http://www.dot.ca.gov/hq/esc/oe/asphalt_index/astable.html,
it stood at 40.2 in Jan. 1999, 287.1 in Jan. 2007 and 439.3 in Dec. 2007. This is a 993% increase in 8 years and 53% in 2007 alone. At what point will we not be able to afford to repave our deteriorating roads? Imagine the impact on truck transportation and cities since they are net importers of all goods and commodities.

I’m 64 and expect to have to deal with these issues. I can’t imagine how my grandson will manage.

Eduardo Mirahyes

http://exceptional-bear.com