Prosper Better than a Billionaire Despite High Gasoline Prices

Good morning, Live Better than a Billionaire-a-Holics!

Are you feeling motivated this morning? I certainly hope so. I know that I am!

Before getting into the substance of this post, let me remind you of my teaching plans for the rest of this month in the Boston area:

In Brookline, Massachusetts (617-730-2700)

Course V268: Franchising Opportunities to Start a New Business on September 21 and 28 (this is a new course to help you find the right franchise operation for you)

In Newton, Massachusetts (617-559-6999)

B 2172: The 2,000 Percent Solution (creating ways to accomplish 20 times as much with the same time and resources: It's like cloning yourself 20 times! -- see www.2000percentsolution.com for background)

I also offer individual tutorials and seminars on these subjects year around.

Introduction

Many billionaires will experience serious economic reversals due to high gasoline prices. And so will many non-billionaires.

Gasoline prices shouldn't matter much to a billionaire. Right? Wrong!

We need only look back to the 1970s when gasoline prices first soared to realize that gasoline prices have negative impacts well beyond what it costs to fill up your gas tank.

Just imagine that your billion dollar family fortune is tied up in an automobile company, and you can quickly see the potential implications.

As a person with less capital and more incentive to take care of your own situation, you can probably shift faster into a more advantageous position. So let's get started looking at how to build your edge over the billionaires.

We would all like to find a way to benefit, instead of being harmed by higher gasoline prices. What can we do?

Observations

Higher gasoline prices change behavior. When behavior changes, the values of the assets and businesses involved in that behavior also change.

Let's look at a few examples.

Early reports indicate that people are driving less. Does that surprise you? Hardly. You're probably driving less yourself.

Whenever people decide that gasoline prices are going to be high for a long time, they will also change their choice of vehicle. Expect the prices for new and used large SUVs to drop by more than the impact of the increased gasoline prices. Why? It won't be trendy to use so much more fuel and drive up everyone else's costs. Also, when prices are high and refinery capacity is limited, the possibility of gasoline shortages will be on peoples' minds.

But what about real estate that's located far away from stores and easy access to other resources? That, too, will drop in value compared to more convenient real estate.

Businesses will be affected as well. Services like Netflix that don't require driving should do better at the expense of DVD and video rental locations like Blockbuster offers.

Higher gasoline prices will be passed along to consumer for items that use a lot of petroleum. So inflation will be higher, and your paycheck won't stretch as far.

We're in the calm before the storm now. Heavy heating costs haven't started yet (which will be vastly greater than gasoline cost increases). Most consumers are assuming that high gasoline prices are temporary, rather than permanent and possibly going higher. People still have enough room on their credit cards to fill up the old SUV.

Recommendations

The best way to deal with a probability of much higher priced gasoline for a long time is to think through how you would run your life if that occurred.

Let's look at a world in which gasoline is hypothetically $10 a gallon. What can you do?

1. Buy energy-efficient property that's within easy walking distance of almost everything you need.

During the 1970s, such real estate soared in value despite rapid increases in interest rates and inflation.

2. Finance any real estate purchases with fixed rate mortgages.

When inflation gets rolling, you'll be borrowing at a negative after-tax interest rate. It's like getting a subsidy from your lender and the government.

3. Sell any real estate that's not within easy walking distance of where people need to be and not energy efficient.

You have a brief window where this will still work. If you are out of these properties within six months, you'll be fine. By next year, everyone will catch on and it will be hard to move these potential white elephants.

4. Buy an energy-efficient vehicle before the employee pricing deals end this month and unload any non-energy-efficient vehicles.

Prices are already shifting rapidly in these markets. Soon, there will be no discounting of fuel-efficient vehicles and list prices will start to soar.

5. Change your life so you don't have to leave home so much.

This might mean starting to tele-commute, beginning a home-based business or simply changing jobs and recreational activities.

6. Invest in energy efficiency.

Few homes and businesses are as energy-efficient as they could be. You'll often earn the money back in months. If you wait, the price of gear and installation will soar.

7. Shift your investments into areas that will benefit from higher gasoline prices.

For example, the prices of many oil companies' stocks haven't risen as much as the price of oil has. You can also buy exchange traded index funds at low multiples in countries that have a better oil position than the U.S. does such as Mexico.

What if gasoline prices don't hit $10 a gallon? You'll still be better off than you are today. Many of the lag effects of moving from $1.30 to $3.00 per gallon gasoline haven't hit yet. Be the first on your block to make the right moves.

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N.B. As you can tell, I'm experimenting with color. Let me know what you like and what I should change about my use of color.

Please let me know what else you would like to learn, and I'll do my best to help in future blog entries.

Here are some upcoming subjects:

Tomorrow, I'll share some ideas for how to enjoy watching the upcoming baseball playoffs better than a billionaire.

Wednesday, check by to read about how to become a frequent guest on television and radio programs for less than five dollars a day.

Thursday, get advice for growing your wealth faster than a billionaire.

Friday, we'll look at how to visit your relatives (including those you don't like) and have a ball!

Saturday, you'll find out ways to buy real estate better than a billionaire.

If you are new to this blog, be sure to check out the updated table of contents entry that I posted on September 14. It will help you find earlier entries that may be of interest. I'll update this table of contents every week or so for your convenience.

August 31 was the most frequently read blog entry to date. Be sure to check it out!

Thanks so much for your support of this blog. I'm delighted that so many tens of thousands of people have made this blog part of their regular reading habit!

If you like this blog, please let others know who might also enjoy it. E-mailing your favorite post to them is a great idea. My post on saving money on heating costs this winter is a good choice. You can find it at http://livebetterthanabillionaireon5dollars.blogspot.com/2005_08_30_livebetterthanabillionaireon5dollars_archive.html/.

Thank you to my many friends, students, clients and blog readers who are spreading the good word about this blog.

If you are visiting today because someone invited you, I'm delighted to meet you! Let's stay in touch.

Remember to check out

Live Spiritually Better than a Billionaire at http://livespirituallybetterthanabillionaire.blogspot.com/,

Be More Successful than a Billionaire at http://bemoresuccessfulthanabillionaire.blogspot.com/,

Enjoy Mansions Better than a Billionaire at http://enjoymansionsbetterthanabillionaire.blogspot.com/,

Enjoy Football Better than a Billionaire at http://enjoyfootballbetterthanabillionaire.blogspot.com/ and

Be a World Hero Better than a Billionaire at http://beaworldherobetterthanabillionaire.blogspot.com/.

May God bless you.

Donald W. Mitchell, Your Dream Concierge

Copyright 2005 Donald W. Mitchell