Observations

When I am on my boat I go up to the cockpit for a few minutes every night. I enjoy the sound of the water against the hull and looking at other boats at anchor in the creek. Last time I started thinking about my next publication and about John and Judy. John is kind enough to send me challenging articles. I save them because I want to address his concerns. John is a good man. Enough said.

He likes to think about major issues and he is not afraid of addressing the most sensitive ones. For instance, when I tell him that thinkers like K. Armstrong suggest the concept of God is evolving, he discusses the issue with calm. I appreciate his mature response.

John likes the cold weather and his dream is to contemplate the universe from a frozen, snow-covered mountain in Montana. Judy is his delightful, charming, sensitive, and elegant wife with a superb sense of humor. She instead likes warm weather. As I do. We always joke that she should leave John and run away with me to a tropical island.

They live in a college town near Washington. John therefore is easily exposed to speakers with national and global perspectives. A few weeks ago he sent me a paper by Dr. Bakhtiari, a leading authority on the subject, on why the price of oil could go to $100. Or even higher.

I doubt it. This is exactly what people were predicting in the 1970s and oil sagged to $10. When I took a course in technological forecasting a few decades ago, I learned that new technologies, even the most breathtaking ones like the transistor, find their use in industry very slowly due to the cost of switching to new technologies.

As the price of oil keeps rising, new technologies are introduced and become widespread. A typical example is the hybrid car. Years ago it was a concept, now it is an accepted technology. When a technology becomes obsolete (e.g. the propeller), new and revolutionary technologies are found (e.g. jet engines), to go faster and cheaper.

Technological innovation is an unforeseen event for the masses. It is risky to extrapolate prices. New unknown technologies will certainly appear and place a cap on oil.

(This Observations appeared in the 10-23-2006 issue of The Peter Dag Portfolio ).

George Dagnino, PhD Editor,
The Peter Dag Portfolio.
Since 1977
2009 Market Timer of the Year by Timer Digest
Portfolio manager

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