|The 'survivability of mankind' is at stake: are you ready?
By Paul B. Farrell, MarketWatch
Jan. 9, 2006
ARROYO GRANDE, Calif. (MarketWatch) -- "This is the first scenario
I've seen where I question the survivability of mankind," said Richard
Rainwater in a recent Fortune interview. He's No. 112 on the Forbes
400 list of America's richest, worth $2.3 billion made in oil and real
estate: "Most people invest and then sit around worrying what the next
blowup will be. I do the opposite. I wait for the blowup, then
The "survivability of mankind?" No wonder his wife Darla, a former
bankruptcy financier, calls him "Dr. Doom." He's a combination Noah
building the Arc and Darth Vader building the Death Star, with a
half-billion war-chest ready to pounce, bargain hunt, bottom-fish, buy
distressed properties, prey on crises, again.
He reads books like "The Long Emergency: Surviving the End of the Oil
Age, Climate Change and Other Converging Catastrophes of the 21st
Century." He regularly checks blogs like LifeAfterTheOilCrash.net, a
clearinghouse for commentaries by "the best paid, most widely
respected geologists, physicists, and investment bankers in the
world." Unfortunately, most people are blind and deaf to their
Oil is the biggest economic weapon of mass destruction on his radar.
And when it reaches critical mass and the flash point, its impact will
ripple across the planet and bring about "the end of life as we know
it." That's the "Rainwater Doomsday Scenario." And compared to that,
I'm a cockeyed optimist.
OK, so the collapse is coming, that's a given in his scenario. But
still, two crucial uncertainties remain: When will it start? And what
will trigger it?
My prediction: There's an 86% probability that America will collapse
into a major economic recession and a sustained bear market in 2006,
far worse than the dark days of 2000-2002 with its $8 trillion loss of
market cap. And as the FEMA/Katrina disaster proved, Congress, the
White House and Homeland Security are in denial, lost in their
self-serving narcissistic egotistic happy-talk, incapable of seeing,
let alone anticipating, the perfect storm on the horizon.
Ergo, their response will likely add fuel to the spreading contagion
rather than solve it. So if Rainwater's right and oil is at the center
of the economic WMD, it looks like just about anything could trigger a
worldwide meltdown. And today the world is full of triggers.
So, what event(s) will trigger the conflagration? You tell me!
Seriously. Last summer we conducted a "Mega-Bubble Meltdown Poll" and
were overwhelmed by the responses. We received over three times more
than any other single column in nine years. And we summarized the
results in a follow-up piece on strategies.
So give us your honest opinion. We believe you know better than the
clueless spinmeisters on Wall Street and in Washington: Tell us which
of the following triggers are likely to push us over the edge, into
another recession and bear market. Pick more than one if you like. But
help us by focusing on your best picks. And feel free to pass this on
to a friend, ask them to vote in the poll:
20 triggers for the coming collapse
1. Oil & energy as the trigger. Warnings: Crude at new records.
Gas-guzzlers still feeding big egos. GM, Ford troubles. New political
dangers: Venezuela, Bolivia, Russia's natural gas threats to Ukraine.
2. Foreign trade deficit as a trigger. Warnings: Recent monthly
deficits top $65 billion. This year's deficit will beat 2004's $617
billion. Foreigners now own $2.5 trillion of America.
3. Federal budget deficits. Warnings: Federal debt now $7.8
trillion. Add another $400 federal deficit this year. By 2010,
interest on debt will equal our defense budget.
4. Corporate pension defaults. Warnings: Congress lets pensions use
absurd estimates of future returns, adding problems on top of
problems. Airlines, auto, others heavily burdened, default to
5. Government pensions deficits. Warning: A near $400 billion mess
draining local taxpayer resources.
6. Weak U.S. dollar as trigger. Warnings: Foreign nations may
replace dollar reserves. Even Warren Buffett is now making foreign
currency hedging bets of $20 billion.
7. Social Security deficit. Warnings: We have no choice, cut
benefits or raise taxes; but politicians hate both in an election
year, so it'll just get worse.
8. Health-care insurance costs. Warnings: Employees' costs
increasing. Costs feed inflation. 43 million uninsured.
9. Medicare as a trigger. Warnings: Going broke faster than Social
Security. Prescription drug benefit adding an unfunded $8 trillion.
Long-term estimates of $36.6 trillion.
10. War and military defense deficit. Warnings: Iraq and Afghanistan
wars cost over $200 billion a year. And lately we hear of new plans to
invade Iran next.
11. Homeland Insecurity triggers. Warnings: Minimal legislation to
protect ports and chemical plants. Federal budget cut border patrol
90%. Vigilantes patrolling. FEMA an under-funded disaster.
12. Class gap widening. Warnings: CEOs and the rich get increasing
share of wealth, ownership and tax cuts, while labor's income is
reduced and latest budget cuts mainly hurt lower economic classes.
13. Congressional pork-barrel. Warnings: Pork, tax cuts and
out-of-control spending. And with no veto threats, Congress runs amuck
like teenage addict with stolen credit cards.
14. International credibility. Warnings: Image problems:
Wiretapping, Abu Ghraib, Gitmo, secret prisons, and more.
15. Real estate as a trigger. Warnings: Speculation. Cheap money.
Home-equity loans used to fund current expenses.
16. Personal-savings shortfall. Warnings: National savings rate now
below zero, down from 8% in early 80s. We're now obsessed consumers,
blind to saving for tomorrow.
17. Consumer-debt bubble. Warnings: Americans are living beyond
their means. Consumer debt is $2 trillion, an all-time high. Personal
18. Political scandals and trials. Warnings: Libby, DeLay, Rove,
Scanlon, Abramoff, Frist, Ney; the list is growing.
19. Hedge fund risks. Warning: Doubled since 2000 to over $1
trillion as pension funds, discouraged with the stock market, are
taking bigger risks, further endangering retirement funds.
20. Excessive P/E ratios. Warnings: Not just Google at 50 times; the
stock market is about 30% overvalued.
In last summer's poll 86% of our readers said there was a better than
50-50 chance of America's economic bubble exploding. With multiple
trigger points, we have the makings of a perfect storm.
In this new poll we want you to tell us when you think it will happen
and which of these trigger points will push us into a recession and
another bear market. Send us your thoughts about these two crucial
issues. Later we'll summarize the results and offer strategies.