From Laguna to London

The inventory of copper cathodes at the London Metals
Exchange has tumbled to record lows. The inventory of
shimmering, chrome-rimmed SUVs rolling through Laguna
Beach, California, has soared to record highs…Both
phenomena illustrate a demand for natural resources that
shows no sign of exhaustion.

Laguna Beach is a beautiful place, which is why your editor
and his kids were hanging out at the place all last week.
(The fact that a good friend offered a beachfront home for
our use, free of charge, provided a second reason to visit
the town).

But Laguna is also an unusual place. It is home to both the
"uber-riche" and the "uber-surf" crowds. A few uber-riche
surfers also mill about. But Laguna was not always thus.

Watercolor artist, Norman St. Claire, pulled into town on a
stagecoach in 1903 and began to paint canvasses of the
Laguna surf, hillsides and lagoons. "His fellow plein air
artists in San Francisco were so impressed with his work
and his praise of the weather that they soon followed," relates. "By the late 1920s, there
were about 300 permanent residents of Laguna, about half of
whom were artists." The Hollywood elite followed shortly
thereafter. Mary Pickford, Judy Garland, Rudolph Valentino
and Charlie Chaplin all maintained vacation homes in

But by the late 1960s, when your editor first began
vacationing in Laguna, "granola heads" crowded the streets.
Hippies, surfers, and Hare Krishna devotees seemed to
comprise most of the year-round population. The scent of
patchouli, mingled with "Sea & Ski," wafted on the ocean

Today, a few artists, surfers and aging hippies still call
Laguna home, especially if they have inherited a hefty
trust fund somewhere along the way. But the uber-riche and
quasi-riche have become the town’s most conspicuously
visible social class. Their cars have also become
conspicuously visible. Almost every resident of the town,
it seems, drives a pricey foreign car or a monster SUV,
adorned with glitzy, oversized chrome rims – usually one of
the pricey Italian brands.

Although one may still hear the unmistakable jingling of
kartals (cymbals) when passing by the Hare Krishna temple
near downtown, "pimped out" Hummers have become far more
plentiful than Hare Krishnas. So numerous are the
impressive autos that your editor’s youngest son invented a
simple little game to play with his siblings: Whoever spots
the "hottest car" within 60 seconds wins. (Daddy is the

Every sixty seconds, each of the three kids would spot some
sort of "hot" car: Typically, a high-end SUV with oversized
chrome rims. And every sixty seconds, the winning hot car
would be a vehicle we would not likely see back home, even
if we had watched the road for 60 DAYS. Most of the 60-
second champs were gas hogs like the, GMC Denali, Mercedes
G-Wagon, Range Rover HSE, or Hummer H1.

Clearly, in Laguna Beach, money is no object…and neither
is fuel efficiency. Elsewhere in the Los Angeles area,
appearances have become so important – especially
automotive appearances – that many Angelenos are stretching
their pocketbooks to the limit, just to "make the cut,"
socio-economically speaking.

"I have this acquaintance in Burbank, California – to
safeguard his anonymity, I’ll call him ‘Homer’ – who drives
a 2004 Mercedes-Benz SL500," relates a writer for Motor
Trend Magazine. "This fact makes me more than a little
envious…That said, I most definitely do not envy the
price Homer has to pay glide along in his SL500’s rarefied
cockpit. Each month, to cover his lease, insurance, and gas
bills, Homer shells out more than $1,800. The thing is,
Homer isn’t rich. He inhabits a $735-a-month studio

"Of course, you’d never know this if you saw Homer on the
road" the Motor Trend writer continues. "Out there, he’s a
master of the universe, ruling from the helm of one of the
world’s finest automobiles. Asked about this seeming
lifestyle imbalance, Homer replies, ‘C’mon. This is L.A.
You either have a nice car here, or you are toast. I mean,
I’ve had women beg me to take them out in this car.’"

We Americans continue to consume – and to over-consume –
without any evident distress or anxiety about the rising
costs of our consumption. Very few of us worry about the
future supplies of the cheap credit and cheap energy that
have been facilitating our over-consumption. So far, $3.00-
a-gallon gasoline has not dented the appetite for massive
cars, any more than $7.00-a-pack cigarettes have curbed the
demand for cancer sticks.

Forget the Chinese; we Americans consume plenty of natural
resources all by ourselves.

The richest fifth of the world’s population, including the
U.S., consumes 86 percent of all goods and services and
produces 53 percent of all carbon dioxide emissions,
according to E: The Environmental Magazine. "Looked at
another way," the magazine relates, "that same privileged
fifth also consumes 80 percent of the world’s natural
resources and generates 80 percent of the pollution and
waste. The U.S. alone, with only five percent of the
world’s population, gobbles up 30 percent of the natural
resource base, using 20 percent of the planet’s metals, 24
percent of its energy (the highest per capita consumption
in the world) and 25 percent of its fossil fuels."
Because we are "driving more car" and "buying more house"
than prudent financial practices would dictate, we also
consume more natural resources than prudent resource
stewardship would allow. Our conspicuous consumption may
not be exhausting the world’s supply of natural resource
just yet, but it is beginning to exhaust many of the
world’s CHEAP supplies.

The nearby chart tells the tale. As global copper
consumption has reduced copper stockpiles at the London
Metal’s Exchange (and elsewhere) the copper price has
soared. There’s still plenty of copper to go around, but
maybe not plenty of CHEAP copper. The situation in crude
oil is, obviously, even more acute. The world is not
running out of fossil fuel just yet.  But it may have run
out of $40 crude oil forever.

The resource bull market continues…Buy the dips.

And the Markets…



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