[MD]

Don't forget the mantra of many MBA programs:

"Grow or Die, Buy or be Bought"

[threadbear]

Are there any economic/political system that could retain the positive aspects of capitalism, without having to become, essentially, a ponzi scheme?

[ab0di]

Are there any economic/political system that could retain the positive aspects of capitalism, without having to become, essentially, a ponzi scheme?

Look into market socialism and economic democracy. After Capitalism by David Schweickart is a good starting place.

Amazon review:
The evils of centrally planned socialism on the Soviet model are widely proclaimed, but capitalism has equally negative side effects: gross maldistribution of the fruits of the economy, the breeding of a mass consumer culture, and destruction of the environment among them. Capitalism may well collapse under its own excesses, but what would one propose to replace it? Margaret Thatcher's mantra was TINA...There Is No Alternative. David Schweickart's vision of "Economic Democracy" proposes a serious alternative. Even more fundamentally, it opens the door to thinking about alternatives. His may or may not turn out to be the definitive "successor system," but he is a leader in breaking out of the box.

Schweickart, David, After capitalism, Rowman & Littlefield Publishers, 2002.
ISBN 0742512991 (cloth) 0742513009 (pbk.)

[jdmartin]

Are there any economic/political system that could retain the positive aspects of capitalism, without having to become, essentially, a ponzi scheme?

Your question is basically a question of sustainability - can an economic system such as capitalism be sustained indefinitely (i.e. no losers at the end).

Ultimately I would say no, although modified socialism is probably the closest you could come to it. If you've got a very small, manageable growth rate, you can prolong capitalism for a long, long time. But unless you've got a substitute for the resources that are consumed (i.e. a constant recycling of everything already made or in use, rather than a constant search for new materials), you're going to hit a wall at some point.

If you look back at the history of many indingent peoples, many of their economies were to some extent capitalistic in nature. When not raiding their neighbors for slaves or clear-cutting the forests, they proved that you could build a very sustainable culture so long as the natural world could support it. You could work hard to gather more furs to trade with other tribes so long as you balanced that idea with not wiping out the beaver so that there was something there to replenish itself. Since unbridled capitalism concerns itself mostly with growth and making money, it is a system doomed to fail eventually unless it is either modified to maintain sustainability or you've got an infinite amount of resources available. Since the second one is impossible, the first has to be done. Sadly, there is little stomach amongst many people to promote sustainability, as it cuts into their profits at some point.

For example, banning Wal-Mart and its ilk could be easily argued as a sustainability issue, to maintain local economies. How many people would support such a law that dismantled Walmart? There'd be national riots, because as long as I get my Chee-Tos for 15 cents less then life is good.

[Leanan]

Someone at DailyKos posted a blog about a new kind of economy. Dunno if it's at all practical, but he had some interesting ideas.

It's been awhile, so I may be misremembering the details, but the gist of it was that no one would be allowed to exchange money. Everyone would work (if they were able). The goods they made would be sold from government stores, and they would be paid, just as workers are today. Only the money would be electronic-only, and non-transferrable. When you bought something, your account would be docked, but the money wouldn't go anywhere. It would just be deleted. When you died, your account would be zeroed.

I think the idea was to give people incentive to work, but not allow insane income disparities to accumulate.

[Kez]

I'm not exactly sure how come the stock market keeps going up and up, when for every winner there is an equal and opposite loser. What am I missing?

You are missing the essence of capitalism. It requires constant growth. That's why companies are expected to report growth every quarter, year after year after year.

Coca-Cola makes billions of dollars a year. Why does Wall St. expect them to show growth every year? What's wrong with just staying the same, when you're making that much money?

It's to avoid the problem you describe. The company must keep growing, or someone is going to end up a sucker - the last guy to buy the stock, as you put it.

Yeah I understand that. My point is that in the stock market, money is not created magically out of thin air. Someone somewhere has actual cash and buys the stock, and the prices go up.

I'm guessing that the 401K money and other regular pension type investments are still greatly outpacing all the sellers. In other words, the guy who manages the mutual fund gets say $10 million in that month, while only $6 million worth of his fund was sold, which means he has to buy $4 million worth of something right away.

If that is true, then that means when enough of those accounts are withdrawn, baby-boomers retiring, or whatever, then the whole market is gonna be screwed simply because not enough people are just throwing buckets of money into the system anymore. At the same time, all the young investors who are paying attention will be yanking their money out as well.

[BabyPeanut]

Orphans of the Oil Patch By Matthew Goldstein, Senior Writer, 8/1/2005 4:27 PM EDT
It's a good bet that Enchanted Rock Capital won't be the only energy hedge fund to close its doors this year.
Last week, the Houston-based fund with more than $150 million in assets shut its doors after just nine months of operation. The fund's managers decided to call it quits after posting a negative 7.5% return on investment this year.

--More--

[grink1tt3n]

Hedge funds have been a hot topic for the past few years. As the housing bubble deflates, these speciality funds may be unraveling. Keep your eyes peeled.

http://www.dealbreaker.com/2006/10/archeus_undone_by_accounting_a.php

Another week, another hedge fund goes down. This time it’s a child of Salomon Brothers—Archeus, run by Gary K. Kilberg and Peter G. Hirsch. The official word is that whoever was running the books at the Manhattan based hedge fund screwed up, which prompted redemptions. Of course, having its main fund down almost 2% this year probably didn’t help.
The bottom line? Archeus went from $3 billion under management last year to around $700 million today. And everything’s getting redeemed back to investors at the end of the year.

And from NYT:

Archeus Capital, a highflying hedge fund that just a year ago had assets of $3 billion, told its investors yesterday that it would close. The closing of the fund, which was founded and run by two former bond traders from Salomon Brothers, highlights how sensitive hedge fund investors have become to weak performance after last month’s blow-up of Amaranth Advisors. Amaranth is shutting down after a series of bad bets on natural gas.

Could be related to this (rather long) informative piece from the thread "Darkside of the looking glass" (posted by skiwi): http://www.businessjive.com/nss/darkside.html

[TommyJefferson]

http://www.businessjive.com/nss/darkside.html

Interesting presentation. Thanks.

[grink1tt3n]

Hedge Funds Are Tempted to Let Loose Dogs of Risk
http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_gilbert&sid=atB3P3xe27FE

Hedge funds are facing increasing pressure to deliver results in a slowing economy:

You promised investors 15 percent, 20 percent, 25 percent returns. You took their money, subtracted your 2 percent fee, cranked up the spreadsheet and rolled your balls on the global roulette wheels.

Hedge funds have garnered just 7.6 percent in 2006, about the same as last year, according to an index compiled by Credit Suisse Group and Tremont Capital Management Inc. Pickings have slimmed from 9.6 percent in 2004 and 15.4 percent in 2003.

Meantime, the number of new hedge funds that opened their doors declined 54 percent to 549 in the first half from 1,211 a year earlier, according to Chicago-based Hedge Fund Research Inc.

Returns of 7 percent or less aren't sufficient to fund the future liabilities of pension funds and other investors, according to Bill Gross, chief investment officer at Pacific Investment Management Co. in Newport Beach, California.

[Johnston]

Firstly, I know nothing about investing... so forgive me if this is a stupid question.

Presumably, if oil starts getting scarce, the price will rise dramatically. It is said that a 5% shortfall between supply and demand could result in a 400% price increase.

So if you invest alot of money in oil before that happens, won't you do extremely well out of the situation? In effect hedging yourself against price increases?

Surely anyone who believes in imminent PO would have alot of money in oil futures?

[gego]

First of all a hedge requires that you take an offsetting position, so you are not hedging, but speculating. (Look up the technical definition of a hedge.)

But understanding that you are loosely using the word "hedge", yes you could profit from a speculative position that would help you pay for the increased costs that you will incur if oil shortages push up the price of oil. But the cost of oil is not going do be the only problem associated with peak oil, so you may solve one problem only to face many others that having a few dollars in your pocket will not solve.

[Doly]

So if you invest alot of money in oil before that happens, won't you do extremely well out of the situation? In effect hedging yourself against price increases?

Surely anyone who believes in imminent PO would have alot of money in oil futures?

Oil futures are definitely not for beginners. That's the advice of all the experts around here.

Alternatively, you could invest in oil companies, or energy funds. That doesn't require much specialized knowledge.

But, in any case, you have to realise that just because the general trend goes upwards, it doesn't mean that there won't be downs on the way. We are in the middle of one. Oil reached $80 earlier this year, and now it's about $60.

[pup55]

If you had put the minimum $2500 investment in Fidelity Select Energy Portfolio (FSENX) on December 31, 2004, it would have been worth $4131 on October 31 of this year, meaning that you would have made $1600 or so profit over that roughly two year period.

If you were the average schmoe that drives 10,000 miles per year in a car that gets 20 miles per gallon (thus buying about 500 gallons of gas per year, or 1000 gallons total) you would have still come out ahead even if the price of gas had gone up more than $1.60 per gallon.

During that same time, with some peaks and valleys, gas went from 1.78 to $2.23, so you would have indeed fattened up. Even at over $3.25 for gas over that whole period, you would still neutralized any effects of the increased fuel prices on you. They also have a natural gas fund, so if you are a user of natural gas, there is an opportunity there too.

If the price of gas levels off, like it did in the last year, you are sad, you only made 8%. But, you did not have to pay as much for gas, so no harm done.

Most of the big mutual fund companies have funds that specialize in the energy industry, have no loads or sales commissions (which eat your lunch) and are managed by professionals who know what they are doing. This particular one has a $2500 minimum investment, plus a variety of other rules, but basically, this allows the average schmoe to go around at the Christmas Party this year and talk about how the energy issue has no effect on you, and how you fattened up this year on your oil investments, etc. etc.

Capitalism: The gift that keeps on giving. Too bad it's unsustainable.

Note: I am not selling Fidelity or any other investments. Never take investment advice from someone who has a job. Do not believe everything you see on the internet.

[quote]Fidelity.com

Note/Disclaimer: I believe so strongly in this I did it myself right after I joined PO.com, and put about a year's pay into a similar fund. I will let you figure out what happened.

[MD]

.....Alternatively, you could invest in oil companies, or energy funds. That doesn't require much specialized knowledge......

Agreed.

Furthermore, if you don't have money to invest in energy, then I suggest any career at a viable energy company will keep you eating when many others are going hungry.

[EnergyHog]

You've got the right idea but instead of black gold, go with yellow.

I'm a firm believer in PO and own zero oil futures.

Taxes, inflation, demand destruction.

I'm only giving you hints because you really should research important decisions like this and understand what you are doing so that in the future when conditions change you will have the knowledge to adjust.

Fishing lessons, not fish.

[threadbear]

If you have any cash at all, a proper hedge is gold. Though I'm in Canada, my income is in US dollars, so I have to hedge, and gold is the best hedge against a failing currency.

Peaking oil will be one of a series of cascading events triggering an economic inflationary depression. One of the consequenses of a depression could be sharp reduction in oil demand, a windfall profit tax on producers, refiners and retailers, and a govt push to find alternatives. Don't count on oil shares retaining their present value. The spirit of the times is changing.

[drew]

Investing is dead easy, tech wise. I can trade a stock in about 30 seconds, but knowing which ones to buy or sell is the hard part. I'd suggest some serious reading before committing dollars. Investopedia.com is a great site for beginners for instance.

At some point though you need to bite the bullet and buy. Here conviction helps. I believed in the idea of peak oil before I bought stocks so I have done quite well. I believe in the arguments which allows me to hold when others are panicking and selling. I have faith in myself; this point is very important.

Once you gain some confidence you will calm down and not over-react to events. The times we are in represent buying opportunities due to high volatility in commodities pricing. Similarily, bad news about good companies is another buy signal.

For instance you could have bought research in motion for 69 bucks after the lawsuit was settled last summer; it now trades at 160. CIBC is another way more conservative example; 2.4 billion Enron lawsuit payout drops the share price to 68 two summers ago, it trades for 90 today, and pays a 2.70 dividend!

It is scary but fun, and can be really rewarding; I have doubled my money in the stock portion of my portfolio in 24 months. Overall including mutual funds my gains averaged 22% per annum since I began actively trading in November of 2004.

You need to seriously read, and read some more, and then again.

There is a lot of bad advice out there, as well as investment pros trying to make a buck off you as opposed to really giving a whit about your well being, and all manner of scams and scam artists too!

Did I say read?

I should have said that in answer to your question, yes, you can protect yourself; almost all my money I made in stocks came from oil & nat gas stocks, and a nifty gold/silver proxy fund that trades on the TSX as a stock

Lastly, once you've made a decision, give it time to play out. Stick to your guns.

Drew

[jeffvail]

In a linear system (e.g. "prices go up or prices go down") you can hedge very effectively by buying a future or option to offest your own consumption of a given commodity and essentially lock in a fixed price for that commodity for a set period of time. However, our system is much more complex than that.

For starters, energy costs for most people are only part of the equation: income, home value, mortgage payment on that home (interest rates), purchasing power of the US dollar, rate of inflation (don't fall into the trap of thinking that the last three are always tightly correlated--they are subject to various types of manipulation).

If I read your question correctly, you want to hedge your quality of life against the potential future even of Peak Oil (to the extent that this is possible through the financial markets). I would consider a crude oil call option. It is by no means a perfect hedge, but it is the best available in my opinion, for the following reasons:

1. An option is a better hedge vehicle than a future for the lay investor--something several years off and not too far out of the money (e.g. a 2010 call at $80/barrel strike). This is because, unlike futures, the most that you can lose is the price that you initially paid. This allows you to invest all of your hedge funds into options, rather than saving some in reserve to cover a future margin call, and thereby controlling more of the root commodity for your money. In addition, because you can purchase an option out of the money, you can again controll more of the root commodity--though the trade off is that if oil doesn't move past the strike, your option has zero value. Not really a problem since we're talking hedge, not speculation or investment.

2. Hedging agaisnt crude oil directly hedges against the cost of your energy use--at least to the extent that the energy that you use is fungible with crude. That means that it will closely match your expense for gasoline and heating oil, less closely for natural gas, and even less closely for electricity. It will also hedge (with similar corrolation) against the increasing cost of anything that you buy that requires energy in the production process (pretty much everything).

3. Hedging against crude oil on the NYMEX (traded in dollars) indirectly hedges against a falling dollar. If the value of the dollar drops by 25%, this will exert upward pressure on the price of dollar-denominated crude oil, though they will not track exactly.

4. Hedging against crude oil may work as a hedge against falling suburban home prices. If crude oil prices rise to the point that they make suburbia less viable, this may make suburban home values drop. This link is more tenuous, but makes sense to me under most (though not all) future scenarios.

5. Hedging against crude oil will provide a hedge against inflation, for the same reason that it provides a hedge against the US dollar. HOWEVER, a future scenario involving deflation will undermine (though not necessarily completely) all of the above reasons why crude is an effective hedge. It is my personal opinion that, at least as long as financial markets are functioning, the US government will tend towards inflation rather than deflation. In particular, our entitlement system and debt load (both government, corporate, and consumer), make inflation a far more politically viable option than deflation.

6. As a previous post mentioned, in order for a crude oil option to be a hedge, not speculation, it must roughly match your predicted consumption of crude oil over the given time period. However, when you add the quantity of crude that your family will indirectly consume over a three or four year period, and adjust for the vulnerability of your house and source of income (if applicable) to crude oil price increase, I think that many people can use a crude oil option as a viable hedge.

The ideal hedge against Peak Oil would probably be a basket of a mix of crude oil call options, put options on the S&P 500, and put options on the 10 and 30 year. Something that would simultaneously operate to protect against energy price increases as well as broader economic failure and drop of the dollar in either an inflationary or deflationary environment. But this would have to be narrowly tailored to individal circumstances and is beyond the scope of the question...

[threadbear]

I would advise against reading much of anything about investing and simply research Google news. Follow Asia Times online, read the economic sections of newspapers and magazines, domestic and foreign. Also compare and contrast the business news with the political news and follow the money. The business section often gives a more concrete and consise picture of events than appear on the political funny pages.

The political section supplies a kind of soap opera version of the business section with the added twists and turns of ideological passions, personal dramas and petty absurdities. They're distractions which serve to draw attention away from the real issues; Money, money and money.

If you follow the business section and ignore the political section, (except to glean the intentions of the power elite, through the propaganda they blanket us with) you'll do well investing.

Working from the holistic to the ballistic, you should be able to target a trend. For example--uranium is rocketing and will likely go up further. You can deduce this partly from the business section, but also from some of the political pages. The nuclear lobby is broadcasting it's desires to build many more plants, and they're using politicians as reliable mouthpieces to condition the population to the idea. If you think they will be successful, invest in uranium.

People who make investments based soley on minutely detailed graphs and charts, without reading from a wide variety of sources, may as well try scrying or using tea leaves to discern the future. Just use your head and gut and you'll do better than 9 out of 10 investers and that includes their brokers.