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The Oil Factor: Protect Yourself and Profit from the Coming EnergyCrisis Paperback – February 1, 2005

45 customer reviews

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Editorial Reviews

From Publishers Weekly

Stephen Leeb, editor of the "Complete Investor" newsletter, believes the U.S. economy is headed for a significant fall because of a severe shortage of oil, which has been inextricably tied to the economy for the past 30 years. Leeb, author of several books including Getting In on the Ground Floor (also co-written with wife Donna), believes the country must become less dependent on oil imports over the long term. Meanwhile, though, Leeb advises individuals to choose investments based on the longstanding relationship between oil prices and the stock market. He has a number of solid observations based on an examination of the past 30 years of stock performance and oil prices: "Since 1973, the economy and stock market have danced to oil's tune. Sharp rises in oil prices have led to recession/stagflation and plummeting stocks, while declining prices or prices that are just mildly uptrended have led to good times." Leeb provides a great deal of historic context and analyzes industries, selected companies, and other investment choices such as bonds and Treasury notes. Leeb's thesis is well researched, and the book offers a solid, concise overview of the economy and stock trends. Still, given the uncertainty of the stock market-and the lack of job security-readers should consider Leeb's strategies carefully before overhauling their portfolios.
Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved. --This text refers to an out of print or unavailable edition of this title.

From Booklist

Stephen Leeb is president of Leeb Capital Management and editor of The Complete Investor, a monthly financial newsletter. An independent thinker, he has collaborated with his wife, Donna Leeb, on four previous books that often defied the conventional wisdom of Wall Street. Here they forecast an energy crisis caused by U.S. dependence on foreign oil and discuss possible effects of such a crisis on the economy and the stock market. When the world's demand for oil overtakes its supply, oil prices will inevitably soar, and this, say the authors, does not bode well for typical indexed stock funds. Watching the "Oil Index," however, offers help in deciding whether to stay in the market, and natural gas stocks can provide balance to every investor's core holdings. Research on alternatives to fossil fuels shows some promise, the Leebs say, but has lagged behind the demand for new technology. They also discuss straight energy plays, gold, alternative energy stocks, and deflation hedges, all part of a diverse strategy to stay ahead of the game during the volatile years ahead. David Siegfried
Copyright © American Library Association. All rights reserved --This text refers to an out of print or unavailable edition of this title.
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Product Details

  • Paperback: 220 pages
  • Publisher: Warner Business Books; First Trade Edition First Printing edition (February 1, 2005)
  • Language: English
  • ISBN-10: 0446694061
  • ISBN-13: 978-0446694063
  • Product Dimensions: 6 x 0.8 x 9 inches
  • Shipping Weight: 10.4 ounces
  • Average Customer Review: 4.1 out of 5 stars  See all reviews (45 customer reviews)
  • Amazon Best Sellers Rank: #1,987,246 in Books (See Top 100 in Books)

More About the Author

Stephen Leeb is the chief investment officer of a New York-based money management firm, and the author of seven popular books on economics and investment, including the bestselling "The Coming Economic Collapse." He holds a bachelor's degree in Economics from the Wharton School of Business, and an MA and PhD from the University of Illinois. Famous for his accurate predictions (especially of the dot.com collapse and $100-a-barrel oil), he is frequently quoted in the financial media, including The Wall Street Journal. He is a regular guest on Fox News, NPR, CNN, and Bloomberg.

Customer Reviews

Most Helpful Customer Reviews

96 of 100 people found the following review helpful By Orson Wang on August 9, 2004
Format: Hardcover
"The Oil Factor" is a comprehensive and practical investing book disguised in a misleading title. The book is best described as a very lengthy investment newsletter that describes how to use the price of oil to time major investment decisions.

For a book with the word "oil" in the title, you expect discussion of concepts such as Hubbert's Peak and the state of current oil production. Mr. and Mrs. Leeb do not disappoint and present these topics in a way that is palatable to the uninitiated. However, this is not the main focus of the book.

The main focus of the book is the use of a market timing indicator that they call "the Oil Factor". They describe a way to use the price of oil to predict the direction of the US economy and thus the direction of US stocks. The premise is that all economic activity in the US involves energy and the principle energy source is oil. It is an interesting idea and they have a decent amount of back-tested results to show how utilizing the Oil Factor to switch between the S&P 500 index and Treasuries would have resulted in a doubling of your returns in the tested time period. This indicator is surprisingly simple and can be easily calculated and monitored by anyone. It is so simple, that it occupies only a single chapter to describe in full.

The bulk of the book is subsequently used to present the case that the economy is in for hard times and investing strategies that will help you prosper. A surprisingly thorough treatment of the entire US Economy is presented. The book is an unexpectedly excellent summary of the bear's case for the next decade. The recommendations are surprisingly specific. Mr. and Mrs.
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29 of 29 people found the following review helpful By Dennis Littrell HALL OF FAMETOP 500 REVIEWERVINE VOICE on October 22, 2005
Format: Paperback
This is an unusually lucid guide for investors with the focus on the price of oil as the key economic indicator.

Stephen and Donna Leeb argue rather convincingly that oil has been and will continue to be the big moose that moves the financial markets one way or the other. They show how sharp jumps in the price of oil in the past have triggered market downturns, and how falling, moderate or stable prices have led to bull markets. With oil at or near its so-called Hubbert's peak (one trillion barrels used; one trillion still left in the ground), and with rising demand from an increasingly industrialized world, especially from a voracious China, the authors see oil ratcheting up to record highs in the near future and more or less staying there. They see this as leading to inflation and negative real interest rates--although in some scenarios (hedging their bets, as all wise prognosticators do), the authors warn about periods of deflation. Consequently, investors need to pick investments that protect them against the erosion of their dollars, while hedging against intermittent economic slowdowns.

The authors have a table on page 202 that uses what they call the "oil indicator" to tell you which investments are best for inflationary periods (the coming norm) and deflationary. For example, when the oil indicator is positive (that is, oil is rising only modestly) you should buy energy stocks, gold, and a few hand-picked others, like Real Estate Investment Trusts. But when the oil indicator is negative (when the price of oil is skyrocketing) the danger of an economic slowdown looms because the price of doing business becomes more expensive for just about everybody in our oil-dependant economy. In such times, deflation is the danger.
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18 of 18 people found the following review helpful By Scott Snyder on September 7, 2004
Format: Hardcover
Lately I've been doing quite a bit of reading on Hubbert's Peak and our energy situation, the effects of mammoth US trade and federal budget deficits, as well as China's re-emergence on the world stage; and I can say that for the most part the Leebs do an admirable job of describing our coming economic environment in the broader strokes. More important, they discuss how to distinguish inflationary from delationary times through their oil-indicator and how to invest in each sitution.

The Leebs make a strong case for having oil stocks, gold and Berkshire Hathaway shares as core holdings in both an inflationary and deflationary portfolio. Aside from REITS, their case for holding defense stocks and particular tech and lifestyle stocks is much less convincing. In fact, their much touted tech stock has under performed the S&P index by 40% over the past year, and made the news last week losing 7% in one day. I am also very aware of one of their lifestyle stock picks and would never put my money there - an organization noted for its success in losing pounds, may also succeed in losing dollars. These are their recommendation sins with commissions.

There are sins of omission as well. There is no mention of TIPS - a surprising omission when discussing inflationary environments. And there is no mention of how or why to invest (or not invest) in China apart from PetroChina (whose ticker is PTR not PRT as printed in the book).

The authors include their results from their last portfolio recommendations from 1998. On the plus side, they honestly reproduce their portfolio warts and all. On the negative side, one of the warts is ENRON (listed as an environmental play) which they correctly report as having a return of exactly -100%.
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