Chris Nelder's Profit from the Peak
Posted by Prof. Goose on June 1, 2008 - 9:45am
We have been terribly remiss here at The Oil Drum in letting you know about Chris Nelder's book Profit from the Peak: The End of Oil and the Greatest Investment Event of the Century. It features wonderful analysis and a well-written guide on ways to muddle through the investing side of the energy crisis we face--and a good number of the analyses cite research done here by The Oil Drum staff. We were hoping to get a review up on it, but it just hasn't happened. I am only 1/4 of the way through it, and I will attest that I have learned something from it. Give it a look, it is doing quite well on Amazon. (And my congratulations--well done sir!--and my sincere apologies for not getting this out sooner.) Under the fold, I include the book's "blurbs" from Charlie Hall, TOD's own Rembrandt Koppelaar, Julian Darley, and Kevin Kerr.
Also Chris will have another book (with Jeff Siegel) coming out soon, Investing in Renewable Energy: Making Money on Green Chip Stocks, but it doesn't come out until October.
"This book is a clearly written, succinct, and well-referenced summary of information about, and related to, what I believe will be the most important issue to strike Western civilization ever: the end of cheap oil. It is clear to me that how we make investments over the next few decades will determine whether we can survive the end of cheap oil and in what fashion. While I am not nearly as optimistic as the authors that there is a supply-side solution to the issues we will face 'post-peak oil,' they certainly have lots of good ideas as to where we might invest in alternatives. This book is a must-have on the shelf of any savvy investor as we face the second half of the age of oil."
-Charles Hall, ESF Foundation Distinguished Professor, College of Environmental Science and Forestry, State University of New York
"Profit from the Peak will help you develop and maintain financial security as the price of oil soars and our globalized economy gets into trouble. Hicks and Nelder show how you and your community can tackle the long transition of relocalization. Learn about the power of locally generated energy-and benefit from their practical guide to investing in the most efficientand attractive of today's post-petroleum alternatives."
-Julian Darley, founder of the Post Carbon Institute and author of High Noon for Natural Gas
"Brian and Chris deliver the painful yet potentially profitable truth about peak oil. Not theory anymore, but reality. This book is a must if you want a clear path to profits in the age of peak oil."
-Kevin Kerr, Editor of Dow Jones Global Resources Trader and President of Kerr Trading International
"Profit from the Peak shows not only why investment in alternative energy sources is about to skyrocket, but more importantly, where investment is going to pay off the most, by concisely describing the huge variety of upcoming energy sources and their relevant companies."
-Rembrandt Koppelaar, oil analyst, President of ASPO Netherlands
Contact
- Content: editors at theoildrum dot com
- Tech support: support at theoildrum dot com
License
This work is licensed under a Creative Commons Attribution-Share Alike 3.0 United States License.
It's good to see something like this. I've been meaning to talk to my investment advisor about restructuring my things. I've been talking to friends and family about PO. The reactions range from 'you're nuts' to passive interest.
I've already started by eliminating all debt. I can work to save instead of working to live.
There's no doubt that the end of cheap oil will be a world changer. While many will suffer, stuck in their old ways, it does represent an opportunity of unprecedented proportions. Now, about the timing . . .
Well, from this book you will get a lot of good advice from what I have read thus far.
Give it a look, it is doing quite well on Amazon. (And my congratulations--well done sir!--and my sincere apologies for not getting this out sooner.)
I have read it, and I owe Chris a review. I am usually better about getting them finished in a timely fashion, but my time lately has been getting eaten up by work. The review is partially done; hope to complete it this week.
No indictment of you intended here RR. I've been talking to Chris about this for weeks too. We've all just been swamped...but Chris is a good and smart guy, so I wanted to get something up here. Today seemed a good day for it.
Probably need more than one book, a thousand might not be enough. Need an honest mind to be able to rightly distinguish what is fact and what is fiction. A manipulative mind might lose control.
There are foreign oil company stocks for sale listed as OTC or Pink Sheet stocks. Some of them are good investments others are not.
Quick question, on top of the usual green-tech chips, does he recommend cashing into the oil price boom and investing on big oil? Specifically, I'm talking about Petrobras here (I'm brazilian) and my common sense tells me those stocks are going to soar, specially when they put those ultra-deep offshore drilling rigs in place, but I have no investment background and could use any advice on that. Would you buy stocks on a big oil company that has a decent prospect of increasing oil production in the near future? If not, why not?
One guiding beacon for me are oil and especially gas companies that have reserves to grow future production combined with good exploration potential (you need a bit of knowledge to understand the latter) - Petrobras certainly fits the bill. I've only ever heard positive reports about the professionalism at Petrobras and this comes out in the fairly measured press releases from the company - that unfortunately are not matched by the government's officials.
Much of oil exploration runs on gut feel, and my gut feel is that the Santos basin may be one of the last great discoveries of petroleum. May as well own a part of that if you understand the risk.
The main problem with Petrobras - which I do own - is that it trades at quite an inflated PE relative to most oil companies.
My strategy is shifting toward sinking money into countries like Brazil, where petrodollars are flowing.
Well, that's quite the comfort. I'm just a college student with some money stashed away and was considering using my knowledge of Peak Oil to do something practical (buying a farmhouse is not a option)with that knowledge. I don't have the cash to invest big "on brazil", so I've picked up a couple of companies that I think will do good (Petrobras and Vale, the mining company). Any other recommendation on investing "on Brazil"? Government bonds? Other companies?
There's a "Brazil ETF" (sorry don't know the ticker...)
I reckon Clean Energy Brazil are also a good punt...
Nick.
Hi,
I'm curious about russian oil & gas companies like LukOil or Gasprom, what do you think?
Best regards.
ConocoPhillips owns 20% of Lukoil. That's how I have indirectly invested in Lukoil.
Is this simply a guide to investing one's money, to try to gain the maximum return, during the early stages of the energy crisis?
As all such investments are gambles, is it really a guide for those who can afford to lose money (and, therefore, for those who already have good monetary resources that will help them prepare), rather than for those who are more at risk from gambling what little they have?
As Mr Nader has been here but not replied, I assume that this actually is just a book about making a profit from gambling on price movements caused by peak. I'm just wondering how this subject fits into the raison d'etre of TheOilDrum?
That's "Nelder" not Nader, and yes I have replied in this thread. It's not about gambling at all, unless you consider all stock trading to be "gambling." As I mentioned elsewhere in this thread, only about 25% of it is about specific investing advice, and the rest is mainly educational background material, featuring the work of TOD editors prominently. How could it not be about the raison d'etre of TOD?
My apologies for getting your name wrong.
Isn't stock trading gambling? Each trade is a gamble on the value of the stock increasing (or decreasing, depending on the type of gamble).
What kind of educational background material are you talking about? If it helps people understands the resource problems we face, or helps them prepare, that all well and good but then why use a title that suggests it's all about making some money?
In broad terms, it comes under the theme of "Discussions About Energy and Our Future", but it doesn't seem the kind of subject that would help in understanding what we can do about the energy and resource crises that we face. Perhaps that's illustrated by the relatively few comments that the article has attracted.
Mm, not really. Sure it can be argued that trading stocks is "gambling," but I think it's closer to "gaming." The former usually doesn't involve any particular knowledge or judgment; the latter does. But I'm not here to defend stock trading on a moral basis...
In terms of educational background material, I did a thorough explication of peak oil theory, then moved on to examine some peaking cases for all other forms of traditional energy, then went into a detailed discussion of various renewable energy technologies. As for the title & focus, that's the way the book was pitched by my employer/co-author, before I was handed the task of writing it. It could have just as easily been focused as a textbook, though.
I can't account for the fairly short comment thread on this--my guess is that it's because I'm relatively new on the scene as an author, unlike, say, Orlov or Kunstler--but I wouldn't use that to judge the book, any more than I would its cover. I took care to explain some options and technologies going forward, and tried to put them in context. Whether I succeeded in that or not, you will have to judge for yourself.
That's fair enough, Chris. I'm morally agnostic on stock trading. If people can afford to risk capital, then I see no problem with it; it just doesn't seem to have a place, that I can see, for most people when trying to figure out how to deal with peak oil and the other crises that are coming up.
But it sounds like your book does a lot more than offer investment advice, so it's a shame that you're stuck with that title.
Thanks for replying.
As the first comment said above, "Now, about the timing . . ."
Indeed, that's the rub isn't it?
For the U.S. in particular, and most developed countries in general, the bulk of the investment capital is controlled by baby boomers. They will remember the last "great collapse" of oil production and the price superspike in the late 1970's, and they will remember how it ended in an oil price collapse of epic scale, destroying investments in alternative energy overnight.
If we could be sure that "this time it's different", of course we would be pouring every dime we have into alternative energy. But we cannot be sure.
One factor that is driving the alternative energy industry is reduction of greenhouse gases and climate change,factors that did not drive investment in the 1970's. Most of the investment vehicles being sold related to alt energy today are billed as so called "green" and "cleantech" investments, much more than "post peak" investments. The problem is that many of these projects are "greenwashing" in that upon careful examination, they do little to reduce greenhouse gas emmisions, and that they are often a mixed basket of so called alternatives including every type of alternative whether it is valid or not, i.e., tar sand, ethanol, solar, wind, etc. are all mixed into the same fund in the interest of diversity.
It is very difficult however to stock pick on your own...some are saying "invest in solar, how can you lose?" Many do not seem to understand that "solar energy" consists of a whole family of competing ideas and formats, with at least 4 or so types of PV (photovoltaic) and several versions of thermal solar energy systems. Sooner or later, probably sooner, some of the least competitive ideas in solar will fall by the wayside, as the market rationalizes itself to the handful of most efficient systems (it always does), and the losing competitors will lose EVERYTHING. Also to be watched closely is the march of technology. Just as in the early days of personal computers and software, one or two pivotal technical breakthroughs can change the game completely with no warning. These are almost impossible to predict.
But the greatest fear across the alternative energy market is the very thing that the average guy on the street hopes and prays for...a price collapse in the oil and gas markets.
It is for this reason that I feel we should keep our argument very broad. I have made this argument often on TOD. Peak oil is a huge near term risk indeed, keep that in the mind of the public, but keep selling the alternatives on the basis of the many other reasons we need them including climate change, national security, national economic destiny, potential for convenient, clean, locally produced energy, and positve high tech good paying jobs created at home in the alt energy industries. We want to keep our argument broad, so that if a price collapse in the oil and gas markets do occur (and it may never occur, we can't possibly know) we will be able to argue to support the alternative energy industries on the basis that we STILL NEED THEM, even in a world of cheaper oil and gas.
In the meantime, be very careful. There will be billionaires and millionaires made in the next few years betting on alternative energy, but there will be many estates, retirements, and people broken. Misplaying or mistiming the economic side of this game could be even more damaging to many than Peak Oil itself, and leave people destitute and broken before we can know that the real peak has even arrived. Indeed, now about that timing...
RC
For all the talk of alternative energy, I'm long on natgas. I'm a small percentage owner in a small O&G company. (emphasis on small) The fundementals remain solid.
Prices by utilities are regulated, so demand doesn't make wild swings.
Despite the price rises, it still not badly priced.
Have you priced a tank of heating oil? A high efficiency natgas furnace or heat pump looks quite attractive.
Utilities get ~20% of their generation from it.
Supplies are still good, and from politically stable areas of the world.
It's 'peak' lags that of oil.
It's easily transportable.
Demand is rising all over the world.
In other areas, I'm looking to get involved, but will likely try to limit my exposure, likely favoring broad funds over individual stocks. I've been burned in the past by prospects that looked like a slam dunk. Remember, even the best ideas can be destroyed by bad management.
I haven't read the book yet, but I'll be picking up a copy this week. So, Chris, chalk me up as another sale. :-)
Hello CrisN,
Congrats on your book! Sorry, I haven't read it yet, but I hope you at least had a chapter on Peakoil's deleterious effect upon future I-NPK global-dispersive flowrates, and what that means for the oil and natgas companies that extract sulphur, plus the effect on the I-NPK producers like [stock symbols] POT, AGU, MOS, CF, IPL {Aus}, OCP {Morocco], and the the MidEast, Russian, and Chindia I-NPK producers. Recall my earlier link where Belarus was largely cutoff from imported Russian phosphate and now has to get supplies much farther afield from Morocco.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Hi Bob,
Actually, the broader fertilizer angle wasn't really on my radar a year ago, when I wrote the book. So no, I didn't address that as an investment opportunity. However, I did get into biofuels in some depth, and their associated vulnerabilities (like fertilizer made from natural gas). Once the ag commodity boom did come on my radar, sometime around last Fall, I started covering it and have written several articles on the subject, such as "Grain's Gains: Profits or Pains?".
--C
Hello ChrisN,
Thxs for responding, also glad to see you give prominent mention to the TODers, ASPO-ites, and other Peakoil people in your posting below. :)
Thanks PG for the mention! I'm just back in town and what a nice suprise to see this posted. Yes it has been doing remarkably well, having hit #42 of all books on Amazon two weeks ago, and being rush-reprinted within the first month it was out. The timing was lucky and fortunate!
In addition to the reviews on the book jacket, I recently received some other positive feedback:
I wrote the book with all classes of investors (and non-investors) in mind. The aims of the book are threefold: One, to educate and alert the public about peak energy; two, to look at the possible solutions in a realistic way; and three, to find profitable investing angles on them. The investing advice really constitutes perhaps one-quarter of the book, and the rest is more educational.
I’m not an analytical whiz like some TOD editors, but for many years I was a technical writer, so I’m comfortable working with technical material in which I have no particular background. Such was the case with my five-year study of peak oil and energy, which culminated in this book. So rather than a lot of original research, the book is a mainly work of journalism: I wandered through the lily fields of peak oil research and tried to pick the best blossoms, which I then tried to assemble into a narrative that the average person could understand.
As such, in many ways it is an homage to the work of ASPO and TOD, and includes references, charts (57 of them) and data from contributors such as:
Colin Campbell
Jean Laherrère
Albert Bartlett
Charles Hall
“Khebab”
Robert Rapier
Stuart Staniford
Euan Mearns
“ace”
“GliderGuider”
“westexas”
“ilargi”
Dave Cohen
Randy Udall
Steve Andrews
Rembrandt Koppelaar
Dave Hughes
Graham Zabel
..and others. I am humbled to stand on their shoulders, and I owe a debt of gratitude to all of the above!
In some sectors, investing in energy isn't hard. I agree with Euan that oil producers who own reserves, like the aforementioned Petrobras, are nearly no-brainer investments and are probably good, set-it-and-forget-it long term opportunities. I would also put certain drilling service companies in that category, like Transocean.
In alternative energy, as HO and others mentioned upthread, in some cases you are trading small startups and pink sheet stocks that are better bets for more sophisticated & nimble traders. But there are some very strong and well-financed plays in alt energy as well, it all depends on your appetite for risk.
I welcome all feedback and constructive criticism of the book.
I got my copy the other day -the first handfull of Chapters is like a brain dump from TOD condensed into book form. Been lurking here for 2+ years -a lot of the graphs look familiar but nice to have condensed into book form on the printed page.
I am also looking to invest so this great for me. Of course I have my own stock watch list and ideas about what I think is going to be the best play, no hints.
If they have the supply and are managed well a lot of companies are going to be leveraged proxies for their asset price. It remains to be seen what happens to general PE ratios post Peak but I expect that if it is going to be energy (or lack of it) that causes a decline then Energy related stocks should hold up.
Overall if you are a 'PO believer' and want some advice on which areas to build up a chunk of cash to help you through the 'more difficult later phases' of what Energy decline implies I would recommend the book...
Regards, Nick.
As a general rule, by the time the public is really getting ready to jump into an investing sector in a big way, the insiders have already made a fortune and are getting ready to bail out. So we may consider the following article not at all surprising:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aLDlyhc.73Jo&refer=home
RC
Markets never move up in a straight line. If you want to pick a price for oil 3 months out, that's just gambling - who knows what will happen with hurricanes, short term economic activity, demand, and so on. Perhaps the "smart money" has jumped out of the oil futures at the moment.
But long term, individual oil stocks still look pretty good to me, in terms of an almost complete lack of speculative froth.
Take my favorites: RIG (Transocean), DVN (Devon), and APA (Apache), and you will see that a whole lot of "insiders" have made a ton of money already, at least the ones who got in early - RIG: 7x, DVN: 4x, and APA: 4x had you invested 4 years ago and held until today.
But if you look at the profitability of these companies, you will see that they have really not been bid up in some sort of speculative frenzy. APA: forward PE of 9, RIG forward PE of 9, DVN forward PE of 10. Contrast that with, say, INTC (Intel) with a forward PE of 15, and you can see that these stocks are still quite cheap from a simplistic fundamental analysis.
In fact, the only way you can justify these low PE ratios going forward is if the price of oil were to drop. And most of these "forward" earnings estimates are not based on oil at $135, they are based at oil of slightly over $100.
So how do I spot speculative froth?
* PE ratios of large companies over 30
* frequent puff pieces in USA Today and Time Magazine about energy stocks and "your best energy mutual fund" investments
* hearing *accurate* stock tips from your formerly PO-clueless friends about energy stocks that are doing well
* bookshelves packed with peak oil books
But even then, the trend can continue for quite a while, especially given Peak Oil fundamentals. Dotcom went on for far, far longer than I had guessed it could.
Yes-IMO the new bubble scam will be in Alternative Energy-watch guys like Blodget jump all over this one.
Those are generally good ways to spot speculative froth, but I have seen numerous examples where a whole sector might look frothy, and yet within the sector there are a couple of gen-u-ine winners. It takes some research and a discerning eye (and a bit o' luck) to know the difference.
Speaking of which, for those who are interested, I'll be back on The Neil Cavuto Show today from 3:10-3:15pm PST on Fox Business (live TV), to try to explain why speculation plays only a very minor role in current oil prices.
Tell Neil we said hello. :) Good luck.
Thanks PG, it went well I thought. As it turned out, I was put "opposite" Byron King of Agora Financial (he writes for Whiskey & Gunpowder) to talk about one of the very few things we disagree on--the role of speculation. Byron is a peak oil believer and as he noted in the interview, we shared a table & lots of good discussion for several days at the ASPO conference in Houston last year. Nice to see a friendly face on the other side who knows what he's talking about for a change! I sense that even Cavuto is coming around...last night he was talking about the energy "crisis" that we have to do something about.
Hey Nedler!
Be sure to tell us when the video gets U-tubed....and maybe list the other videos too.
Great book. I push it on all my wide-eyed friends. The information is largely familiar to the avid readers here, but the book is a great resource for newbies. They don't have to struggle through the vast amounts of material around the web....they can just sit back and read a well organized and detailed summary in the comfort of their favorite armchairs.
cheers
-dr
ps....my fumbling fingers might have posted part of this a few minutes ago. If so, my apologies.
hmmmm...that was a lame post on my part. I meant to suggest that newbies will find the information pleasantly accessible, and they will hopefully get more charged up about the PO problem. Folks already familiar with the subject will still find it an excellent read, and very complete reference book. If investors can make a few bucks (or avoid losing them), great...but the real strength of the book, imho, is in education. It's up to the reader whether to try the profit route, or get involved in other ways.
-dr
I just started the book. So far it's excellent. I very much appreciate the investment suggestions from a TOD perspective.
I was debating between Common Wealth by Jeremy Sachs and Profit from the Peak. Glad I chose the latter.
Just p/u'd my copy today from B&N and looking forward to reading it. To quote John Manyard Keynes.... " The market can remain irrational longer than you can remain solvent."