The situation is more alarming when one considers that combined population of China and India makes up over 1/3 of world’s population. The number of unemployed workers in China is greater than entire labor force of United States. The competition for relatively unskilled jobs will continue, and it promises to accelerate going forward. The average American who does not stay ahead of curve or does not keep pace of trend will find his or her job being outsourced – not to mention average wage being driven down by global competition. I, for one, believe that this continuing trend of globalization will make world a better place, as hundreds of thousands of people will finally be empowered as they climb out of absolute poverty (again, over half of world’s population currently live on less than two dollars a day) – and as prices of consumer goods are driven down still further. The average American will probably disagree, but trend of globalization and “offshoring” will not stop. The last time United States adopted economic and military isolationism we had a Great Depression and subsequently, World War II. I sincerely do not think that this was a coincidence.

The trend of general aging population and globalization will have a profound impact on all Americans. Ultimately, I think all Americans will benefit – although it may not be clear to people who are losing their jobs today. For initiated and nimble, you will not only survive but thrive in these “interesting new times.” Imagine a market for your product that is over ten times size of population in United States. China and India has historically disappointed – as citizens of those countries have historically been too poor to consume much U.S. goods and services. Globalization and offshoring will change all these. A world more equalized economically will also mean a much more secure and less conflictive world.

Now, I want to address a similar concern of all Americans – as era of cheap energy (basically cheap energy prices as experienced by Americans for last twenty years) comes to a close. While I think oil prices will decline in short-term (i.e. for next few months), I am longer-term bullish on both oil and natural gas prices (I will only discuss oil in this commentary). Consider following:

• The world supply of oil is flattening out. Readers may not know this, but United States today still produce enough oil to satisfy approximately 40% of total domestic demand. The United States also had 22.7 billion barrels of proved oil reserves as of January 1, 2004, eleventh highest in world. According to Energy Information Administration (EIA), United States produced around 7.9 million barrels per day during 2003. This is down sharply from 10.6 million barrels averaged in 1985. The peak of domestic oil supply occurred sometime during 1970s. Today, total domestic production is at 50-year lows – and still falling.
• While Saudi Arabia (the world’s top exporter and contains 25% of world’s reported reserves) has claimed that there are and will be no supply problems for next few decades, they have not been transparent with their reserves data. According to Simmons & Company International, five to seven key fields in Saudi Arabia produce 90% to 95% of its total oil output – all but two fields are extremely old – with last major find reported in 1968. The last publicized reserves data was in 1975 – when Saudi Aramco was still managed by Exxon, Mobil, Chevron and Texaco. In that report, world’s best experts determined that all key fields at that time contained 108 billion barrels of oil in recoverable reserves. If this holds true, then peak of supply in Saudi Arabia will come soon. Moreover, if report is correct, then there is really no “plan B” (unlike during 1970s when center of power shifted from Texas Railroad Commission to OPEC due to peaking of supply in United States) – crude oil prices will soar.
• The “last frontier” for production of oil (namely North Sea, Siberia, and Alaska) is now aging. Most companies are now struggling in order to even maintain their current production levels.
• World oil demand continues to grow. Oil demand in early 1990s stayed relatively flat (at around 66 to 68 million barrels per day) but over next ten years to today, world oil demand increased 14 million barrels per day. Today, total world oil demand is greater than 82 million barrels per day. The energy “experts” who in early 1990s predicted a flattening of oil demand growth and who wrote off demand growth in developing countries were dead wrong.
• No new refineries have been built in United States for past two decades, even as refineries have been closing every year during that same time period. Refining capacity from 1981 to mid 1990s also dropped drastically (this author estimates a drop of approximately 6 million barrels per day in refining capacity during that time period). Since 1994, however, an expansion in refining capacity at existing refineries has contributed to an increase in refining capacity from 15.0 million barrels per day to 16.7 million barrels per day (as of today). Despite this expansion, however, domestic refining capacity is still stretched to limit, as utilization at U.S. refineries is now averaging nearly 90% -- leaving no cushion room if something unforeseen happens.

To see entire article, please go to: http://www.marketthoughts.com/z20040624.html

The second example is (unfortunately) in my book, also. I say unfortunately because my book is in final copy edit stage, so no one has had a chance to read and benefit from it, and since a buy-out offer was made for stock last week or so, stock will no longer exist (this means a rewrite for me, before publication). The company in question is Rouse Co. (RSE), which was just purchased by General Growth Properties (GGP). Oddly enough, you’ll find GGP in my book, also – if you bother to pick it up. Anyway, that’s neither here nor there - RSE, on takeover bid jumped over $16.00 a share in one day! Whew! Why couldn’t they have waited a couple of months until my book was released? RSE had opportunistic trait of raising their dividend every year since 1993 and I was quite content with its performance through years.

Well, that last paragraph blew my train of thought on this article. All I can think about at moment is my rewrite.

I would like to take this time to explain something to you. I have never considered myself a writer nor am I a stock market professional. I am simply a man with 39 years of experience and a passion for stock market, trying to share what wisdom those years have given me. When I sit down to write an article, I seldom have an idea on what I’m going to say. It was same way when I sat down to write my book. I just meant to put down a few words on paper for my 18-year old son so he would have a sound, concrete plan for investing in those companies that make up stock market (quite frankly – I didn’t want him to blow his inheritance). Whether you find merit in what I say, I have no idea. What I do know is that life is just too short to learn everything you need to learn by yourself, without help of others.

There, now I’m satisfied with that ending!

For more excerpts from book ‘The Stockopoly Plan’ visit http://www.thestockopolyplan.com