Spreading the Seeds of Democracy

March 1, 2011 at 3:49 am 2 comments

Excerpt from Free March Sidoxia Monthly Newsletter (Subscribe on right-side of page)

As we bathe ourselves in petroleum products, it is moments like these that highlight our deeply engrained addiction to oil. The flames of fundamental human rights, freedom, and democracy are spreading like wildfire throughout the Middle East and North Africa, and as a result, the cost of living and doing business has gone up. What started as a random plea by a Tunisian fruit merchant in response to insidious corruption (26 year old Mohammed Bouazizi burned himself to death in revolt to continuous crooked government bribes) has resulted in a broad wave of protesters removing two authoritarian, autocratic Arab leaders. Egyptian President Hosni Mubarak and Tunisian President Zine al-Abidine Ben Ali have been swiftly cast out by energized protesters, and other repressive leaders are likely bound to topple as well.

Who’s next and when? You’ll have to stay tuned, but Colonel Muammar Gaddafi, the Libyan leader, is on the short list. Leaders in Yemen, Bahrain, Jordan, and Algeria are among the other countries that are feeling the heat too. Even though Egypt, Libya, Tunisia, and other aforementioned countries remain relative oil lightweights, fear over a political contagion spreading to more substantive countries like Saudi Arabia has gotten speculators frothing at the mouth, which pushed oil prices above $100 per barrel and gasoline prices to an average of $3.37 per gallon (about $3.60 in California according to AAA motor club).

Source: FT.com - The U.S. population is a fraction of the size of China and India, but we continue guzzling dramatically more crude.

While the bloodshed on the streets has created fodder for great sensationalist headlines for the media outlets, the fact of the matter is that the spread of democracy is nothing new, and the innate desire for basic human rights has never died. Going back to 1900 the world housed about 10 practicing democracies, and today there are arguably more than 100 democratic (and quasi-democratic) countries (see blue line in chart below).

Source: The Financial Times.com

In the U.S., our standard of living has exploded for more than a generation. The internet – and applications like Facebook and Twitter – have flattened the planet and connected the rest of the world to the pleasures available to free, transparent, and open societies. As we have experienced firsthand in Iraq, however, regime changes and moves towards democracy can be messy and costly. Ultimately, the native populations must spearhead the drive toward democratic, political change. Regime change solely rammed through by the U.S. will only create temporary change, and with our fiscal wallets empty, we frankly cannot afford it (see Global Babysitter­).

Embracing Alternatives

We didn’t run out of stones in the Stone Age, and we did not run out of steel in the Industrial Revolution. When it comes to oil, the same principle applies. As globalization accelerates the expansion of democratic, emerging middle classes around the world, other oil-rich countries, like Saudi Arabia, understand the havoc that $100-$125 dollar a barrel has on demand destruction. Just like a drug dealer does not want to scare its addicted users, so too oil producers do not want to price consumers out of the market with high prices. Oil may be the lubricant for global commerce, but unlike the empty promises offered by the Jimmy Carter era in the 1970s, technology advancements in the alternative energy industry have reached critical mass. If you don’t believe me, just take a gander at the $17 billion the Chinese are pouring into electric vehicle technology (see Electrifying Profits), or the 20% total energy mandate from renewable sources being instituted in Europe by 2020. Even if we choose to watch from the sidelines and pick our noses, our foreign competitors will wave with delight as they embrace alternative energy resources and race past us. Even if political turmoil temporarily worsens in the Middle East, any additional oil price increases will only make alternative energy resources more economical, and thereby accelerate adoption and make disciples of alternative energy less dependent on some of these oil-rich, corrupt regimes.

Wade W. Slome, CFA, CFP® 

Plan. Invest. Prosper. 

www.Sidoxia.com

DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients own certain exchange traded funds, but at the time of publishing SCM had no direct position in any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC “Contact” page.

Entry filed under: International, Politics. Tags: , , , , , .

Alligators, Airplane Crashes, and the Investment Brain Share Buybacks and Bathroom Violators

2 Comments Add your own

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Trackback this post  |  Subscribe to the comments via RSS Feed


Receive Investing Caffeine blog posts by email.

Join 1,475 other followers

Meet Wade Slome, CFA, CFP®

More on Sidoxia Services

Recognition

Top Financial Advisor Blogs And Bloggers – Rankings From Nerd’s Eye View | Kitces.com

Wade on Twitter…

  • Underground Freeway. Nobody has ever accused Elon Musk of thinking too "small": video.cnbc.com.ln.is/avp3e $TSLA 2 days ago
  • QOTD: “Human wants & needs are infinite, and so there will always be new industries, there will always be new professions.” Milton Friedman 2 days ago

Share this blog

Bookmark and Share

Subscribe to Blog RSS

Monthly Archives


%d bloggers like this: