Market Review: The New American Dream

You wake up in the morning. Maybe you read the newspaper. Maybe you walk the dog or drink some coffee. And if you are like the vast majority of Americans, you will drive a considerable distance from your house in the suburbs to arrive at your job. What is slightly disturbing is that the average American finds nothing out of the ordinary with commuting 100 hours to and from their place of business every year.

This is due to that fact that living in the suburbs – away from the city, away from the hub of American commerce – has been ingrained in us. Suburbia is the new American dream…at least, according to the Post Carbon Institute (www.postcarbon.org).

You see, your editors were surfing the net one day when they came across an ad for "The End of Suburbia" DVD. Of course, we purchased it from the Post Carbon site. With a title that gloomy, how could we resist?

"Americans, by and large, love suburbia. It has promise, space, affordability, convenience, family life and upward mobility…And as the population of suburban sprawl has exploded, so too, the suburban way of life has become embedded in the American consciousness. Suburbia and all its promises has become the American dream," starts the DVD.

Now, dear reader, there is a good chance that you are among the 50% of Americans that are suburbanites. Don’t think of this missive as a personal affront. Most of your editors grew up riding their bikes around the cul-de-sac, attending block parties, and begging rides off their parents.

The intent of "The End of Suburbia" is not to make fun of suburban dwellers, but to make them think – is this way of life sustainable? The way of life that flourished because cars and cheap (and abundant) oil made it so people could flee from the industrial cities in droves. What happens when that way of life is threatened?

Some would say that the suburban lifestyle is being threatened and destroyed right now. The way that the suburbs are set up, one must get into their car for just about everything. And it isn’t just traveling to work – you have to drive to the grocery store, pick up the kids from soccer practice, make a stop at the dry cleaners…all these little trips add up when you are refilling your tank.

With natural gas at all-time highs and oil above $60 a barrel, it’s getting harder for the average American suburbanite to pay the electricity bills for their "McMansions" and fill up their cars – whether it’s an SUV or sedan.
Yet, as "The End of Suburbia" points out matter-of-factly, we continue to turn away from the facts that are right before us. What will be the straw that breaks the consumers back…the situation that will finally be our wake-up call?

As the geophysicist Marion King Hubbert said, "Our ignorance is not so vast as our failure to use what we know."

Kate Incontrera
The Daily Reckoning

October 16, 2005 — Baltimore, Maryland

P.S. Today’s piece barely scratched the surface of the issues "The End of Suburbia" brought forward. Watch this space for more on suburbia in the era of peak oil next weekend.

P.P.S. Want to catch a glimpse of what the destruction of the suburbs would be like? If the consumer spending dries up to the point that the malls are forced to permanently shut their doors?

— Daily Reckoning Book of the Week —

Empire of Debt: The Rise of an Epic Financial Crisis
by Bill Bonner and Addison Wiggin

October has been an especially good month for us here at The Daily Reckoning…we launched the Agora Financial Reserve…and oh yes, Bill Bonner and Addison Wiggin finished their second book.

After a year of very hard work (and ten different drafts) their newest soon-to-be bestseller, Empire of Debt, is finally done, and being printed as you read this. To celebrate, your editors gathered in a secret location with many bottles of Shiraz (and a couple bottles of whiskey) – and burnt every single glorious page of the ten drafts of the manuscript.

Standing around a metal trashcan, reading excerpts from a book, cheering and then tossing the pages into a smoldering pile may sound odd to you, dear reader, we realize. But the thousands of manuscript pages piled behind a certain (ahem) editor’s desk were getting to be too oppressive…and kept conjuring up memories of late nights spent searching for citations. To see it reduced to a pile of soggy ashes was a wonderful reward.

We are, in no way, advocating the burning of books. We urge you to preorder your copy of Empire of Debt to read, not to set ablaze.

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THIS WEEK in THE DAILY RECKONING: The war in Iraq…the history of resource markets…the possible 51st state…it’s all in this week’s catalogue of essays…

THE IRAQ WAR – PART I    10/14/05
by Bill Bonner

"There is much controversy surrounding the war in Iraq…but most who speak out against it, miss the true geopolitical importance of the war. Bill Bonner explains…"

THE GREAT RESOURCE BULL MARKETS… 10/13/05
by Doug Casey

"At this stage of the super-cycle, more people have access to markets than ever before, increasing their standards of living and therefore increasing their demand for resources."

THE BOOMING 51st STATE   10/12/05
by Chris Mayer

"Credit cycles turn, dear reader, and this one will turn also – both in the mainland United States and in the future 51st – and anywhere else easy money has left her unmistakable footprints."

IN THE AFTERMATH, PART II   10/11/05
by Justice Litle

"At the end of the day, America has essentially borrowed $2 trillion from the rest of the world and spent it in mostly nonproductive ways. The Fed fueled this binge and facilitated a gold rush in paper assets."

A MOGAMBO, A MACHINEGUN AND A BOOM 10/10/05
by The Mogambo Guru

"As Halloween is right around the corner, it seems fitting that there are some seriously frightening things happening in the economic world. The Mogambo Guru explains…"
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FLOTSAM AND JETSAM: You think that SUV mania is confined to the United States? Think again – Chris Mayer sends us this report from under a palm tree in Fajardo, Puerto Rico…

THE CONSEQUENCES OF PROSPERITY
by Chris Mayer

The mania for big ugly impractical SUVs extends beyond the continental U.S. Here, in the Commonwealth of Puerto Rico, you will frequently see the over-sized monstrosities making there way over the country’s crowded roads.

Prosperity, it seems, has finally come to the once sleepy tropical island. But such prosperity has consequences.

Gas is expensive here too, even if prices are quoted in liters. And people are willing to go to some lengths to get the stuff cheap. During my stay, a newly launched web site tracked and disclosed the cheapest gasoline prices on the island.

Shell had the lowest prices on the island – only 64.7 cents per liter, well below the 76 to 80 cents found elsewhere. Consumers rushed to get their fill and the stations – 15 of them – ran out of gas.

Mob behavior set in and soon consumers hit the next cheapest source – Texaco. Another 15 stations ran out of gas again. The San Juan Star reported on the following day, "Passing motorists noticed the lines and rumors spread quickly, creating another mini-hysteria."

Despite all of this, there was never a shortage of gasoline on the island, and Shell says it will continue to sell gasoline at the lowest price.

The mob mentality is a powerful thing. Once it sets in, the voice of reason becomes a bare whisper.

Regards,

Chris Mayer
for The Daily Reckoning

Editor’s Note: Although Chris has been lounging on an island for the last few weeks, that doesn’t mean he hasn’t been hard at work. In fact, not only has this editor of Capital and Crisis come up with the biggest, most daring offer of his entire career – he’s discovered a company that he believes will be the world’s next Berkshire Hathaway. Find out about this stock – and his unbelievable offer…