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Friday, February 24, 2012

How much OIL? New Doomsday Clock?

Listen Below: The MOST IMPORTANT Radio Interview Ever 

A New Clock?

How much OIL?

Comparing this to Cold War DOOMSDAY CLOCK

Comments Published NY Times, DOT Earth
September 22, 2011 

Without doubt oil remains as the most critical element to the operation of our modern industrial society. Its exhaustion would bring its machinery to a complete halt. Even the banking system and money could cease to exist as energy is required to maintain the grid that electronically transports money world-wide. No grid, no banks, no money.

Words and environmental issues aside trying to nail down "the number" of years remaining in oil reserves is more than elusive. Given the profound implications of such a number, it is one that policymakers, economists and many others should have right at their finger tips. Indeed it is comparable in many ways to the doomsday clock experts referred to during the "Cold War" 

So what is a possible number? Well, taking a ballpark stab at it, using the reserve and production numbers provided in BP's World Oil Report it is roughly less than 15* years. Yikes!...15 YEARS? That just cannot be as I own thirty years bonds and my retirement plans are set for forty years. Try doing the numbers yourself, by Googling their report and doing some simple division. Maybe you can find a way to stretch out the numbers to at least match the maturity of the 30 year bonds. If not, then a prudent exchange to bonds with 10 or 15 year maturities makes complete sense.

The point being; whether it’s 15, 30 or 40 years, this is perhaps the most critical number we need to know and plan with. Short of massive war or natural disasters, this number gives us a sense of when the well runs dry for the modern industrial machine. A possible timeline to when the whole system could simply just come grinding to an abrupt halt.

Bringing back memories of the foreshadowing in Cat Steven’s 70's song, "Where Do the Children Play?

*For sake of discussion we have discounted OPEC reserves as that have moved significantly upwards over the past decade.The underlying intent for increasing reserve estimates is to increase production quotas and thus revenues. The information risks and quality are thus highly suspect. So much so, that estimates of life expectancy range by decades.The concern is not really when reserves are exhausted, but rather, when dramatic cutbacks in production will occurr- the economic impacts of 25%-50% production declines may be just as dramatic as complete exhaustion. There is a high chance that this could occur in the fifteen years noted, so determining the real life expectancy numbers should be one the most important and transparent initiatives on our global agenda.

First Financial Insights Inc.
September 22, 2011
Toronto, ON


The MOST IMPORTANT Radio Interview Ever

What's The Time Line?

 Where do the children play?

Sunday, February 19, 2012

OUTLOOK 2012 AND BEYOND: "State of the Planet Address"

Is it their turn?



Outlook 2012 and Beyond: State of the Planet Address

PART ONE - Where do we go now?


Another year passes; the question of whether there was any positive progress regarding the human condition; the state and prospects for the planet, its economies, markets, social and physical conditions are foremost in many minds. In response to these questions, examined below are a number of key areas of concern, including inter-relationships that also use a new currency or metrics as a device for planetary economic analysis and evaluation. The approach will continue to stress the need to better measure planetary wealth and conditions in terms of concrete physical constructs over the subjective and arbitrary abstract constructs (money, gold, etc) now generally applied. Thereby, creating a better understanding of the planet’s current state of affairs and prospects for the future, resulting from refined integral analysis, evaluation and frameworks under these new metrics.

To our knowledge, this is also an inaugural address as to the State of the Planet” provided in an unbiased comprehensive  form covering a wide range of clearly integrated concerns that are then tied back to markets, investments, economics, social and political issues, planetary constraints and other scientific fields of endeavour. This public narrative is at a high level with a more detailed private report to be provided to institutions and individuals who choose to subscribe.

Our goal is provide these comprehensive reports annually and to include the contributions from some of our best forward-thinking leaders in the key areas of concern set out. Their views and facts will be integrated into the overall annual conclusions of this report, that will place further emphasis on the meta-economic and investment landscapes for the coming and ensuing years for the use of institutional decision-makers, investors and others concerned with measuring and projecting the planetary conditions.

General Background Comments

A broad number of concerns are discussed in these narratives that do not fit into the usual economic or investment discussion and analysis. This is because the usual discourse has been set by the historical narrative of industry, academics, media or politics, premised on the conventional economic hypothesis or wisdom. Factors covered here are believed to better form some of the key concrete drivers; that the conventional measures and market values will ultimately catch up with. Often they catch up, well after the concrete realities have changed substantially in their nature or measure.

Most importantly, while each topic is discussed separately they are deeply inter-connected by linking algebra(s) that change in weight and nature with the circumstances over time. On-going judgement is needed to assess whether either the weights of the factors or linking structure(s) require adjustment. A great advantage is that the metrics used as economic currency under this framework are much more object - providing for clearer analysis and conclusions.

Our Driving Theme – Fix Economics or…
Nations Gravitate to “THE NAURU PARADIGM®

Briefly, the origination of this theme or thesis traces back to the economic and market meltdowns in 2008, whereby it was painfully obvious that the prevailing economic theories (neo-classical) and beliefs were seriously flawed. The global economic system was on the verge of collapsing into an unprecedented oblivion. Moreover, the remedies used to defer the collapse failed to correct the true underlying causes. And so today, the world still remains in the same perilous condition, as evidenced by the continuing situations in Europe, Greece, America and the Mid-East. One may also expect that Asia and South America should soon be joining this popular club.

So why have the current economic systems and their related theories failed us?

While there are a number of reasons; let us just focus on what are believed to be two of the primary causes.

First, economics does not embrace, at its core, the hard realities of the natural sciences; preferring to build its “social science hypothesis” using devices framed from contextual mathematics and logics, using ideas that date back to the dawn of the industrial revolution during the 1700’s. Blaming Adam Smith and subsequent followers is understandable; however, to them at their time of writing, the New World was immense and ripe for plunder. So large in perception, that all possibilities were likely seen as limitless in their eyes.

As we know now, this is not the case – real physical constraints and limits do exist. The world is finite and we are swiftly moving towards exhausting the planet’s finite non-renewable resources that will lead to “at least the collapse and extinction of the current industrial consumer society” that was built on the false premises of these economic models, wisdoms and theories.

Presently, economics does not embed the planet’s physical constraints and realities as part of its general hypothesis or wisdom; rather it continues to blindly call for nations to push for more economic, population, monetary and immigration growth to resolve their current issues. Yet, the recommended cure is the actual disease that speeds these nations to their final curtain – “THE NAURU PARADIGM®. This condition sets the stage, for these nations to be muddled in constant economic, social and political unrest, which will in all likelihood lead to a devastating global conflict and its resultant massive die-off.

Secondly, this flawed economic hypothesis fuels: over population and consumption exponentials; pollution, ecological mismanagement, global warming and a host of other ailments. All that may be tied directly back to the false hypothesis of infinite economic, population, monetary and related immigration growth being the single cure for sustaining the human condition and nations. Indeed, this idea of infinite growth and its complex related ailments could be certainly viewed as the single biggest reason behind the collapse of our present existence or normative civilization model in the final (sic) analysis.

In short today, conventional economics and its related outcomes failed, and will continue to fail as long as they ignore the physical realities governed by science. In particular, physical science and exponential mathematics – for the world truly is finite and cannot possibly grow forever. Neither in today’s realties nor in any foreseeable realities of far off tomorrows…

Redefining Economics and Currencies

The purposes of economics should not be to exacerbate the decline of nations and the planet into the abyss of THE NAURU PARADIGM®, but to slow these progressions, so that the human condition may be sustained for as long as possible. In so doing, offering the possibility that time may unfold other progresses that allow us to reach beyond the stars through the possible discovery of yet unknown principles of the universe – as for certain there are still many to be uncovered.

So by throwing out all past and outdated economic theories and beliefs; the question arises: “Where to begin anew?”

One logical starting point is to redefine “currency” – as it is this device, this pervasive social-abstraction or medium of exchange that is the lifeblood of all the modern economic, political, and social systems. The keyword to be noted is social-abstraction – meaning that the current currency is just loosely tied back to the concrete and finite constraints of physical realities and principles. Rather, it is largely born from the arbitrary notions of value, conceived from within the modern economic hypothesis.

It relies, in a sense, on the “Bigger Fool Theory” - as each entity who accepts this currency in exchange for something, assumes it will receive an equal value of something later. Alas, this is ultimately physically impossible as the planet’s usable resources will at some point be exhausted for all practical purposes – so the last holders of such currency will become the proud owners of plain old hot air.

At the same time, the beliefs pertaining to this currency also encourage insane races towards rapidly accelerating populations and exhaustion of all non-renewable resources – and thus an end to the system itself. The math does not pencil out at all.

What constructs could we possibly use to help define a more practical currency that would act to better guide our economic activities towards a more sustainable existence? Turning to the formula that defines the currencies or elements of the universe may help to answer this question: E=MC2.

Ignoring for a moment the squaring of the speed of light; two raw elements are self-evident in determining the constitution of the universe as we know it: (M) Mass and (E) Energy. And it would thus then be fair and sensible to describe them as defining currencies of the first instance.

However, it is only in their usable forms that they provide the human utility needed to sustain our existence and incent activity. From this belief, two new symbols are derived to thus define either a planet’s or nation’s total physical reservoir of economic currency, they are: UM (Usable Mass) and UE (Usable Energy).

Excluding UE units constantly imported from external bodies of the cosmos, the planet has a set and defined amount of UM and UE units available for conversion to everyday goods and services. It follows that all nations have a defined store of such units too.

Nations then must take their reservoirs of UM and UE units and through complex conversion processes guided by conventional economic models and wisdom, convert UMs and UEs into either UMCs (Usable Mass Consumables) or UECs (Usable Energy Consumables) units, for storage or consumption, which in turn are known as goods and services that provide various forms of human utility.

As efficient commerce requires that entities be able to exchange these UMCs and UECs freely without the frictions and inefficiencies of barter, symbols such as paper money and gold evolved as mediums to convey a right or claim to specified units of UMCs and UECs. The system works fine, as long as there is an abundance of UMs and UEs to be converted to UMCs and UECs for the eventual human utilities required for our existence.

While much more insight may be provided through deeper analysis of these concepts; what is clear, is that system outlined for the planet and  nations is highly dependent on the sum and existence of UM and UE units in order to work. As the inventory of these elements declines; most particularly on a per capita basis, so does the real underlying concrete value of these manifested abstracts - symbols (money, gold, etc) that are used as the mediums of exchange under the present economic hypothesis.

No clever manipulations of these abstract symbols by Central Bankers, Governments, and the IMF or like bodies can ever resolve the underlying issue - create more UMs and UEs to replace depleted units; so as to perpetually support the system and the perceived value of its symbols. It is simply impossible. Period, end of story…

This overall decline in UMs and UEs explains, to a large degree, the monetary, economic and socio-political concerns globally faced by humanity today and no doubt for its remaining tomorrows. These above elements also describe and define a “new economic currency - metric” that is the planet’s real currency directly tied to the constitution of the universe’s economic formula: E=MC2. These elements are to be the economic currency or metric used in all further analysis, evaluation, projections and topics discussed here, as they are the most objective and concrete constructs known to us. They exclude the subjectivity and arbitrariness of the abstract symbols created and used as currency under the current economic hypothesis.

And so, with this definition of a “new economic currency - metric”, occurs a better marriage of economics with universal laws. Thereby, it defines the true physical currency for the planet’s economic system and its related monetary symbols that are used as mediums of exchange.    

Briefly- 2011 Investment Review

Again in June 2011 we tested our past record by calling for a collapse in global stock markets of up to 50% over the next 12 to 18 months. At year end we had seen an almost 30% decline globally and remain committed to this forecast for reasons to be outlined. In addition, we called for a correction in the Gold market when it was near its all time highs; largely because this market was showing signs of a bubble and was thus ripe for a sharp turn in price. It is the old story, when the shoeshine boy (Glen Beck) starts to recommend anything - it is a sure sign, it is time to sell.

Add to this our documented concerns regarding Greece; its implications on global markets and the certain dismal fate for the Euro; attest further to the relevance and usefulness of the metrics and analytical frameworks applied in our assessments. Greece and other EU nations are amoung the first high profile casualties of the “THE NAURU PARADIGM®”. Two things are certain: there is more to come, and while the abstract economic devices and ideas applied may briefly defer matters; they will never cure the real underlying ailments.  

It should be stressed that we are not in the habit of making calls as to specific or short-term market moves, but rather the focus is on major market and economic events, where it is believed that longer-term fundamental conditions are such, that a possible major adjustment is a virtual certainty. Such conditions were clear near the end of the Internet Bubble in 2000; then again in 2007, when the likelihood of a huge meltdown was apparent and subsequently occurred in September 2008. Needless to say, those who listened and acted in these cases, and in 2011 as well, had preserved untold millions in invested capital. They are happy.

Why we have been able to stay ahead of these major market corrections relates back to the fundamental theme, approach and metrics ascribed to. Markets and current economic beliefs cause its group of participants (believers) to think largely in the same way and believe in a false conventional economic hypothesis and its related abstract constructs. Our approach differs, looking to the concrete constructs; the relationships and sums of physical realities (UMs, UMCs and UEs, UECs units) applying object mathematics, with a concern for the structures of the conversion systems. Our economic and investment approach is therefore neither conventional nor contrarian; it is premised on our theme and the “new economic currency - metric” that it embeds.

Markets Remain Constrained

Having said in June, 2011 that we are now in the “Mother of all Bear Markets” there is little new knowledge or information since then that would dissuade us from this view. For a number of very important reasons we believe that the markets are stuck in an “Ice Age” from a view of real valuations that cannot be resolved through conventional means or ideas. This is not good news for many, including investors, pensioners, insurance companies, brokerages and the like. They are two key constraints that should keep real market valuations in purgatory for years to come.

Companies, nations and the planet itself have seen the peak in the creation of perceived and actual real wealth as it was conventionally defined by abstract economic metrics. Now that critical UMs and UEs, such as fossil fuels and other key non-renewables, are at or past peak production it follows that outputs and utility should also begin to decline as there will be less input available – meaning the production of real wealth is declining despite the perceptions created by GDP metrics, accounting profits and other conventional abstractions. Believing that real earnings and wealth are highly correlated to the ∑ of UMCs and UECs units, then the real earnings of the global markets can no longer increase as fewer UMs and UEs are available to be converted. And as the stores of these units are further depleted, so goes the prospects for increases in real earnings and wealth; thereby market valuations.

The peak production of UMs and UEs caps the potential for increases in global market valuations and perceived wealth.

Mathematics serves to further cap any increase in market valuations, even if there is a sharp rise in economic activity that spurs an uptick in perceived earnings caused by abstract or concrete measures. Should such an unlikely event occur; even if for a short period of time, Central Bankers would typically start to raise interest rates to cool the economy and keep inflation under wraps.

Increases in interest rates inversely affect the value of stocks and particularly longer dated bonds. For instance, if rates were to rise from the level of about 2% today; to say 6%, then the valuation of both bonds and stocks could tumble by 50% or more. The US Fed does not plan to raise rates until 2014, but thereafter this boogeyman could rear its ugly head at any time, particularly in the event of hyper-inflation caused by commodity costs escalating due to acute shortages of critical UM and UE units. So, this accepted monetary tool (interest rate increases) may do little to hold down the inflation caused by severe shortage-driven price increases. Its effects are ultimately muted.  

Inverse mathematics relative to interest rates and valuations will serve to restrict increases in both global stock and bond markets. 

In sum, for both fundamental and mathematical reasons, the markets and economies are locked in an “Ice Age in real terms with little prospect for thawing any time soon. Comments and analysis in Parts Two and Three of this report, also act to support this conclusion.

Listed below are the topical lists for the areas to be covered in Parts Two and Three to be released sequentially over the next few weeks.

PART TWOWhat are critical areas of concern?

Metrics of Planetary Wealth
Ineffective Central Banks
Military vs. Safety Nets
Deficits-Fiscal Monetary Trap
Comparative Advantage Fallacies
Geometric Population Increases
Climate-Eco System Deterioration
Pending Scarcities of Critical Non-Renewable Resources
Peak Oil Looms
Euro Crisis Dominoes
Social Unrest Spreads
Geopolitical Map Shifts
Gold Pricing Measures Confidence
End of Abstractions? Wall Street Gang…
Mother of all Shorts

PART THREE- Are there any good things to consider?

US Elections Promise Stability
Occupy Movement Grows
Economic Revisionists Take Hold
Awareness Growing
Social Media Empowers Democracy
Science Makes Progress
Green Technology Advancing
Green Media Taking Over 
Utility Changes
Investment Strategy – Where, What and How?

General Theory of Reality
Algebra of Economic and Physical Existence

Closing Remarks

First Financial Insights Inc.
Toronto, ON
February 20, 2012