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Which sector of economy will be hit first ??

Discussions about the economic and financial ramifications of PEAK OIL

Re: Which sector of economy will be hit first ??

Unread postby dolanbaker » Sat 28 Apr 2018, 14:26:45

pstarr wrote:You are talking to ghosts.

Spookily, you replied.
Ronald Coase, Nobel Economic Sciences, said in 1991 “If we torture the data long enough, it will confess.”
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Re: Which sector of economy will be hit first ??

Unread postby Outcast_Searcher » Sun 29 Apr 2018, 02:41:37

pstarr wrote:You are talking to ghosts.

You get increasingly random. Congrats.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: Which sector of economy will be hit first ??

Unread postby Sys1 » Sun 29 Apr 2018, 05:02:16

Seems the first sector hardly hit is oil production itself.
Just after 2008 crash, oil price collapsed and non conventional oil sector was severly hit.
The consequences is that as soon as economy grows again, lack of investments prevent oil extraction to follow demand as easily as before,
meaning the next economic crash will be faster and harder.
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Re: Which sector of economy will be hit first ??

Unread postby Outcast_Searcher » Sun 29 Apr 2018, 15:37:34

Sys1 wrote:Seems the first sector hardly hit is oil production itself.
Just after 2008 crash, oil price collapsed and non conventional oil sector was severly hit.
The consequences is that as soon as economy grows again, lack of investments prevent oil extraction to follow demand as easily as before,
meaning the next economic crash will be faster and harder.

But there's NOTHING new with that. Crude oil has been quite volatile since the early 70's. Production plans are made based on the perception of how profitable it's likely to be. (When prices are expected to be low, expensive production makes no economic sense to risk).

Supply and demand will continue to to work. If the price gets high enough for awhile, much more production will come online.

Since the last crash had little to do with the price of oil (the vast majority of the credible economists say it was mainly a real estate issue, and point out why), there is no reason (outside the doom-o-sphere) to claim that higher oil prices means a crash, much less a big crash.

Higher prices which will disappoint the people buying gas guzzlers, and even make them whine? Sure, but it's not like they shouldn't learn from history like the people buying high mpg HEV's, PHEV's, etc -- if high fuel prices bother them.

Oh, and oil averaging nearly $100 in 2010 dollars for four years in the 2010 - 2014 period didn't cause a problem with the world economy.

This made-up tale is repeated frequently by hard crash short term doomers. Repeating it a lot doesn't make it true.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: Which sector of economy will be hit first ??

Unread postby onlooker » Sun 29 Apr 2018, 15:56:11

How about its NOT the Economy stupid. The Economy is a sub-sector of the Environment. The Environment destablization will wreck the whole Economy
"Apocalypse Soon: Has Civilization Passed the Environmental Point of No Return?"
"The 1970s program had yielded a variety of scenarios, in some of which humanity manages to control production and population to live within planetary limits (described as Limits to Growth). Meadows contends that the model's sustainable pathways are no longer within reach because humanity has failed to act accordingly." https://www.scientificamerican.com/arti ... no-return/
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Re: Which sector of economy will be hit first ??

Unread postby Outcast_Searcher » Mon 30 Apr 2018, 01:04:28

onlooker wrote:How about its NOT the Economy stupid. The Economy is a sub-sector of the Environment. The Environment destablization will wreck the whole Economy
"Apocalypse Soon: Has Civilization Passed the Environmental Point of No Return?"
"The 1970s program had yielded a variety of scenarios, in some of which humanity manages to control production and population to live within planetary limits (described as Limits to Growth). Meadows contends that the model's sustainable pathways are no longer within reach because humanity has failed to act accordingly." https://www.scientificamerican.com/arti ... no-return/

Define "soon". Notice that we're a good 40 years beyond the 70's, and except in the minds of the hard crash doomers who constantly preach that doom is right in our face, the apocalypse is at least decades off, even though problems (and attempts at solutions) abound.

Civilization may well have passed the point of no return. It doesn't mean doom has to occur in 2018 or 2028 or even 2058. And if it's a gradual thing as folks like KJ point out it might well be, a meaningfully declining population as things get worse could forestall "doom" for a much smaller population for a very long time.

But of course, that scenario doesn't sell newsletters or fill posts with exclamation points, or the ability to shout "imminent doom" in all caps.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: Which sector of economy will be hit first ??

Unread postby onlooker » Mon 30 Apr 2018, 06:36:32

Outcast, first off the LTG study did project precisely that the unfolding collapse scenario would be cumulative and gradual until a breaking point was reached around this time. So it has NOT been proven wrong. Second, uncertainty works both ways, while a form of Collapse may happen only some decades hence, it can also happen quite soon. And why do you say with certainty that the "Apocalypse" is decades away. I thought you were claiming great uncertainty. Do you have some crystal ball nobody else has?
What should not be under dispute is that things have been getting steadily worse in terms of our impacts on the planet.
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Re: Which sector of economy will be hit first ??

Unread postby evilgenius » Mon 30 Apr 2018, 12:05:46

I looked at this thread to see if it might have been the one where I posted that I thought the greatest economic collapse since the Great Depression was coming. It wasn't. I never posted anything on this thread in the days running up to the Great Recession. I better step up. Now is my chance again. I'm going to latch onto a couple of themes already at work. Interest rates are rising. I think many corporations that have taken on too much debt are going to fail. The first of those will be the vanity inspired leveraged buyout schemes which rich people who get rich mostly by luck or who get so creative that they forget human feeling seem to favor. Cheap gasoline and low taxes haven't changed the position of the average American either. This time around there aren't so many especially whites males working in one profession, housing. High gas prices won't be the totally shellacking force they were last time. Rental prices will become a huge worry for many, but the political and social structure won't provide any breaks. Gas prices may make Uber and Lyft much harder places to make a living wage, however. Will the public tolerate on demand transportation prices which rival those of the taxi cab industry on an ongoing basis? Will high gas prices create an understanding by the ride buying public that allows that? I think that depends on whether the fully automated version of that service is available at the same time. If it is still years out, they might. If not, then the whole shebang will probably go another way. Which leads to the next crisis, government spending will fall dramatically. Already government is having trouble paying for important things. Pile a whole sector of the economy, in which too many people have been hiding since the Great Recession, into the dole system, in the form of universal basic income, and watch what happens to an already overstretched system. Then, there is always venture capital to worry about. I think we will see fewer superficial tech start-ups in favor of investment in what venture capital perceives as sure things. Privacy will further erode too, as the huge tech giants show how much political and social power they really have in the face of the reduced competition this will engender. Anyway, that's my current guess.
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Re: Which sector of economy will be hit first ??

Unread postby onlooker » Mon 30 Apr 2018, 12:44:00

Interesting Evil. I think yes we are increasingly in a precarious position economically. The Economy has over the last few years and decades become quite dysfunctional. It has become speculative as bubbles are created and then burst, it has become over reliant on lending/debt while neglecting solid long term investments. And it has become ever more unequal as economic benefits are accruing more and more to the top 1% and less to the normal person. Part of it is the focus on the stock market but also globalization as the entire globe is being subjected to downsizing as Corporations pit localities and people against each other to attain the least costs. Also, a special mention should be given to what I perceive as a horrid endemic corruption infecting the entire planet as money ends up perverting the political process and taking hegomony over all affairs concerning people. So the inequality in real power between the masses and those few who wield so much money is utterly insane. And thus, we see the desires and will of the few take precedence over that of the many. Finally, add to that real resource restraints starting to manifest and we have the making of a gigantic economic malaise that may go boom or may just descend steadily but inevitably affecting different regions and people unevenly and in more or less dramatic ways.
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Re: Which sector of economy will be hit first ??

Unread postby Outcast_Searcher » Mon 30 Apr 2018, 12:50:10

evilgenius wrote:I never posted anything on this thread in the days running up to the Great Recession. I better step up. Now is my chance again. I'm going to latch onto a couple of themes already at work. Interest rates are rising. I think many corporations that have taken on too much debt are going to fail. The first of those will be the vanity inspired leveraged buyout schemes which rich people who get rich mostly by luck or who get so creative that they forget human feeling seem to favor.Which leads to the next crisis, government spending will fall dramatically.

Well, if you're stepping up, how about even a ROUGH timeframe for both events? If all you say is these things might happen some day, that's not "stepping up" very much, IMO.

So roughly what percentage of corporations will go bankrupt due to "too much debt"? Any names? You know, outfits like Value Line keep a good handle on the capitalization of major companies, including the nature of their debt. Much of the debt is medium to long term, which takes a LONG TIME to be a problem, because the coupon (interest rate) doesn't change on such debt until it matures.

And, for example, the ETPer types have been crowing that there is a debt catastrophe in the oil industry and that they are losing money hand over fist on oil fracking and that the industry will collapse under a tsunami of debt for years. And yet, here we are with recent big oil company profits at RECORD levels, even compared to the 2010-2014 period with oil in the $90's on average. So looking at "too much debt" without context, an understanding of the balance sheet and cash flows and earning power, etc. is pretty meaningless. And, SOME corporations going bankrupt is a big yawn. Sometimes they get overextended and do that. Capitalism entails risk. Business and reaching for bigger profits entails risk. Nothing at all new there.

For the point about dramatically decreasing government spending -- good luck with that. That would be a GREAT thing if done right, but with politicians wanting to be elected for handing out favors, that will be their LAST choice. As far as moving toward a UBI, that likely means MORE government spending, funded by MORE taxes. I'd want to see corresponding offsets in getting rid of lots of social programs which the UBI would replace (don't need food stamps if you're getting cash, etc) -- but with all the liberal screaming I'd expect (based on plenty of experience when any social programs are cut), again, good luck getting that to happen.

Look at the rate of job creation recently. If anything, the US economy is getting too tight, which is why inflation expectations and interest rates are heading up. Not exactly a sign of needing to go to a UBI soon. So how long does this take to play out? Two decades? Three? Five?

....

No disresect intended, but IMO you can't make vague hand-waving forecasts with no numbers at all and no hint of timeframes, say you're stepping up, and then later cite a post and claim you accurately forecast ANYTHING with such a post.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: Which sector of economy will be hit first ??

Unread postby evilgenius » Mon 30 Apr 2018, 16:20:20

The thread started in 2005. I assumed people would figure out I meant from now until about the same amount of time after 2005 before the Great Recession hit in 2007. I can remember people talking about what was happening in 2007 on CNBC, looking at the numbers on some show, and denying it was going on. The real hurt started to happen about 4-5 months after that. So, although these things are called sudden, they don't really happen suddenly. Incidentally, I don't mean that this go around will be that bad. I think it will be different. I think we are headed into a recession and it will clear out a lot of old school stuff. Sears is one of those vanity businesses. Essentially, any business that doesn't have enough money left over after paying its interest expenses to keep up with what is going on in the world will have trouble surviving. Toys 'r Us just had it happen to them. Oil will go up. That will hurt a lot of regular people.
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Re: Which sector of economy will be hit first ??

Unread postby Outcast_Searcher » Mon 30 Apr 2018, 18:49:00

evilgenius wrote:The thread started in 2005. I assumed people would figure out I meant from now until about the same amount of time after 2005 before the Great Recession hit in 2007. I can remember people talking about what was happening in 2007 on CNBC, looking at the numbers on some show, and denying it was going on. The real hurt started to happen about 4-5 months after that. So, although these things are called sudden, they don't really happen suddenly. Incidentally, I don't mean that this go around will be that bad. I think it will be different. I think we are headed into a recession and it will clear out a lot of old school stuff. Sears is one of those vanity businesses. Essentially, any business that doesn't have enough money left over after paying its interest expenses to keep up with what is going on in the world will have trouble surviving. Toys 'r Us just had it happen to them. Oil will go up. That will hurt a lot of regular people.

Fair enough. I was mainly pointing out that predictions are a whole lot more useful if they have enough specifics to draw conclusions about them and possibly act -- or tell later if they were correct or not.

Old brick and mortar retail is a classic example of a large chunk of businesses that are in trouble (not all, but many), and will continue to be for some time. For businesses like that -- sure, debt leading to bankruptcy is often the end.

But the fact that the mechanism pushing this wave of retail business failures doesn't mean that retail business failures haven't frequented the landscape for quite a few decades.

For me, as a kid I can remember retail general stores like Grants and Mr. Wiggs being put out of business by newer, cleaner better run stores like (believe it or not): K-mart.

And then a few-ish decades go by, and it's stores like Walmart putting stores like Sears and K-Mart out of business.

And before the 2nd wave is even finished, you have the whole internet thing nudging Walmart hard, because they got way behind on that.

The thing I see in common here is BAD MANAGEMENT for the stores getting pushed out of business. They failed to adapt and change as needed. To do what's necessary to compete with a better model.

....

Will Walmart make it? I don't know, but as a customer, I sure see them fighting back and earning my business for many items against Amazon, for example. I buy a lot of stuff now from Walmart without ever having to leave my home, and get free shipping. If I never have to go into their stores again except to try on bluejeans as I slowly get fatter :oops: , that's dandy by me.

Stores like Sears and JC Penney, that (to me) seem to do NOTHING meaningful to earn my business -- DESERVE to go bankrupt.

I would say the main "problem" for society is net job loss -- except robots and automation seem poised to get rid of a LOT more low skilled jobs than, say, the shift to mostly online retail.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: Which sector of economy will be hit first ??

Unread postby baha » Tue 01 May 2018, 07:12:47

I agree OS,
The new economy is developing so fast the old one can't keep up. I firmly believe the big old companies with 1%ers in charge are failing. They have decided to listen to their shareholders instead of their customers. They are set in their ways and milking it for all it's worth. Kodak, Sears, GE, and now Ford.

The CEO of Ford is abandoning cars. They make the most money from SUVs and trucks so the dollar signs in their eyes are leading the way. This is a bad move. All your eggs in one basket is never good. All it will take is $4-5/gallon and they will be a has been. Hopefully they are working on EVs as well.

I think the travel industry will be hit first. But airlines are always suffering...

BTW - Sears used to be Amazon...I remember shopping the Sears catalog for weeks. And then going to the Sears appliance store to pick things up :)
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Re: Which sector of economy will be hit first ??

Unread postby Ibon » Tue 01 May 2018, 09:01:14

baha wrote:
I think the travel industry will be hit first. But airlines are always suffering...



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Re: Which sector of economy will be hit first ??

Unread postby asg70 » Tue 01 May 2018, 09:52:03

Ibon wrote:
baha wrote:
I think the travel industry will be hit first. But airlines are always suffering...



Freedom from all those damn ecotourists constantly asking me the name of that bug or bird.


Isn't that how you make a living?
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Re: Which sector of economy will be hit first ??

Unread postby vtsnowedin » Tue 01 May 2018, 10:34:26

I will suggest that the suburbs will be hit first and every industry that serves primarily the suburbs with them. Any place with a long automobile only commute will become prohibitively expensive to live in and property values will plummet. Inner cities and those suburbs served by rail public transport will gain. Zoning rules will have to change to allow mixed use so that jobs can be brought within walking distance of employee housing.
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Re: Which sector of economy will be hit first ??

Unread postby Revi » Tue 01 May 2018, 10:58:23

I think it will be like the situation that led up to the beginning of Ready Player One. Supposedly the only places that were viable were the outskirts of a few cities, so the trailer parks started building upwards. People lived in these crazy towers because the places that they came from were no longer possible. There are huge heaps of cars just outside of the stacks because it became impossible to sustain them. Here's a pic of the stacks:

Image
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Re: Which sector of economy will be hit first ??

Unread postby Outcast_Searcher » Tue 01 May 2018, 11:29:54

baha wrote:The CEO of Ford is abandoning cars. They make the most money from SUVs and trucks so the dollar signs in their eyes are leading the way. This is a bad move. All your eggs in one basket is never good. All it will take is $4-5/gallon and they will be a has been. Hopefully they are working on EVs as well.

Agreed. A couple of ironies here:

1). Ford as recently as the 90's was seen as a first mover in ecology. They caused much of the big spike in palladium at one point by buying/stockpiling a HUGE amount of the metal for future catalytic converters. Seems like the CEO at the time was big into clean air and was getting ahead of the curve. So here they are now, and instead of building long range BEV's that will compete with Tesla, VW, GM, etc., they're going for maximum profits AND dirty air via giant trucks and SUV's. Which makes me want to deal with them no more than I'd deal with GM or Chrysler due to their lack of quality by reputation and their terrible service reputation.

(Used this link since the WSJ is behind a paywall):

http://wps.prenhall.com/wps/media/objec ... /3119.html


2). I saw some comments recently on this site about how SUV's are like cars now. I did some research and it's true that now only a little over 10% of SUV's produced in 2016 were body-on-frame -- i.e. using a pickup truck like frame, instead of a car frame.

So now SUV's really are just like cars that get worse gas mileage because of boxy shapes and being bigger/heavier than a Sedan which will carry a similar passenger load. And here we are on a thread talking about economic stress and future lack of oil. So here Ford is clearly going exactly the OPPOSITE direction of anything resembling ECO, and the range on their electrics is currently on the laughable range vs. long range offerings.

...

And they get rid of a really decent very practical car like the Fusion Hybrid, which actually competes pretty well with high volume reliable cars like the Camry (which now has a much better hybrid) and the Accord (which also now has a great hybrid).

...

I found one empty marketing promise from a year ago claiming they are planning a 300 mile BEV for 2020. " Claimed by this Musk-like quote from their CTO (Chief Technology Officer): "I think we have a technology path that will get us a 300 mile range..."

https://electrek.co/2017/05/18/ford-fir ... c-vehicle/

Geez. Sounds as convincing as fast crash doomers telling us they THINK the economy is about to crash every month or so, AKA zerohedge hyperventilation style. :roll:
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: Which sector of economy will be hit first ??

Unread postby evilgenius » Tue 01 May 2018, 12:18:17

There is something about Ford that is interesting. I read something a couple of months ago about their self-driving car plans. Apparently, they are gearing up for a fleet based model. What they want to see is their ownership of the cars that come to pick people up on a piecemeal basis. They want to own the fleets that transport a city. I think that is Uber's eventual model as well. Whether either of these leave room for middle men owning micro fleets hasn't yet entered into discussion. The article talked about the fleet based model and didn't get into whether it would be a broken up ownership scheme or an entirely top down model. When I saw that Ford was discontinuing their cars I thought it made sense according to that story. They are investing in a future that they anticipate is not many years away, but far enough off that the picture isn't quite clear as to how it will develop. They aren't investing in a business as usual future. Right now, they just want to milk the old model for what it can give them. That means trucks and SUV's.
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Re: Which sector of economy will be hit first ??

Unread postby Outcast_Searcher » Tue 01 May 2018, 15:23:29

evilgenius wrote:They want to own the fleets that transport a city. I think that is Uber's eventual model as well. Whether either of these leave room for middle men owning micro fleets hasn't yet entered into discussion.

Well, unless Ford refuses to sell cars to individuals, or refuses to offer cars in volume to outfits like rental agencies with discounts (i.e. they want to get out of the car selling business altogether), I don't see how they can prevent small middle-men agencies from owning micro-fleets.

And, I'm willing to bet that while they might be preparing to compete directly with Uber to survive, they won't get out of selling individual cars UNTIL AND IF the car market forces them, by showing them they can no longer sell cars for a reasonable profit.

I'n not saying you're wrong. That's an interesting idea. I just don't think huge old line companies are quick to change, and I don't think they transform completely until truly forced to do so (by being handed losses for years).

Also, all we have on truly fully automated, safe, highly reliable self driving cars thus far is mostly empty promises and target dates by marketers.

When things like weather are included, it's a tough problem. I don't think we really can have a good handle on when fully self driving cars will be commonplace enough to threaten to become the majority model. It could be decades.

Unless Ford is suddenly becoming a far bigger gambler than makes sense for such an old line company, I question them betting their "life" on that premise. I think it's simply a short term profit maximization calculation, and they hope for the best.

If SUV's are now car-like roughly 90% of the time, re the underpinnings, it's not like they couldn't move back toward sedans fairly quickly, if high gasoline prices forces them to.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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