The Billionaire Pessimists Club

We've heard many times from Warren Buffet about the difficult road ahead for the U.S. economy - the dollar, the perils of living in Squanderville, and the ascendant Sharecropper Society are his most notable objections to the rosy picture painted by Wall Street economists and government officials.

Even Mr. Buffet's much younger, slightly richer, sometimes side-kick, and occasional bridge buddy Bill Gates has been rather down on the dollar lately due to rapidly accumulating debt and the plethora of promises made by the U.S. government.

George Soros and Jim Rogers of Quantum Fund fame are bearish on Bush economic policies and bullish on commodities, respectively. Both of these views bode ill for the American way of life as it has been known for the last half century. That is, the American way of life for most of the citizenry - for the upper few percent of the populace, rising energy and raw material costs are more than offset by a reduced tax burden.

Sir John Templeton has been predicting a U.S. real estate disaster for some time now, and Bill Gross at Pimco has likened the current state of affairs to Rome burning, and much worse.

What do all these gentlemen have in common?

They are all billionaires, they all speak freely, and they all have very serious concerns about the course that the nation's economy has charted.

Is anyone listening to them?

Very few - clearly, not enough. Maybe if there were more billionaires out there talking about issues like this, they could really make a difference. But who? Don't look for the Walton clan of Wal-Mart fame to start talking, or Larry Ellison of Oracle, or Michael Dell of Dell. They don't want to ruin the good thing they all have going.

And certainly don't look for Oprah Winfrey or Donald Trump - they are likely weak on macroeconomics in general and global imbalances in particular.

Just when it looked like the outspoken "Billionaire Pessimists Club" was beginning to lose their momentum, along comes Richard Rainwater.

Richard who?

Good question. Appearing in the current issue of Fortune Magazine, meet Richard Rainwater, billionaire pessimist, dour survivalist, peak oil alarmist, and new hero to this humble blog:

Richard Rainwater doesn't want to sound like a kook. But he's about as worried as a happily married guy with more than $2 billion and a home in Pebble Beach can get. Americans are "in the kind of trouble people shouldn't find themselves in," he says. He's just wary about being the one to sound the alarm.

Rainwater is something of a behind-the-scenes type—at least as far as alpha-male billionaires go. He counts President Bush as a personal friend but dislikes politics, and frankly, when he gets worked up, he says some pretty far-out things that could easily be taken out of context. Such as: An economic tsunami is about to hit the global economy as the world runs out of oil. Or a coalition of communist and Islamic states may decide to stop selling their precious crude to Americans any day now. Or food shortages may soon hit the U.S. Or he read on a blog last night that there's this one gargantuan chunk of ice sitting on a precipice in Antarctica that, if it falls off, will raise sea levels worldwide by two feet—and it's getting closer to the edge.... And then he'll interrupt himself: "Look, I'm not predicting anything," he'll say. "That's when you get a little kooky-sounding."

Rainwater is no crackpot. But you don't get to be a multibillionaire investor—one who's more than doubled his net worth in a decade—through incremental gains on little stock trades. You have to push way past conventional thinking, test the boundaries of chaos, see events in a bigger context. You have to look at all the scenarios, from "A to friggin' Z," as he says, and not be afraid to focus on Z. Only when you've vacuumed up as much information as possible and you know the world is at a major inflection point do you put a hell of a lot of money behind your conviction.

Such insights have allowed Rainwater to turn moments of cataclysm into gigantic paydays before. In the mid-1990s he saw panic selling in Houston real estate and bought some 15 million square feet; now the properties are selling for three times his purchase price. In the late '90s, when oil seemed plentiful and its price had fallen to the low teens, he bet hundreds of millions—by investing in oil stocks and futures—that it would rise. A billion dollars later, that move is still paying off. "Most people invest and then sit around worrying what the next blowup will be," he says. "I do the opposite. I wait for the blowup, then invest."

The next blowup, however, looms so large that it scares and confuses him. For the past few months he's been holed up in hard-core research mode—reading books, academic studies, and, yes, blogs. Every morning he rises before dawn at one of his houses in Texas or South Carolina or California (he actually owns a piece of Pebble Beach Resorts) and spends four or five hours reading sites like LifeAftertheOilCrash.net or DieOff.org, obsessively following links and sifting through data. How worried is he? He has some $500 million of his $2.5 billion fortune in cash, more than ever before. "I'm long oil and I'm liquid," he says. "I've put myself in a position that if the end of the world came tomorrow I'd kind of be prepared." He's also ready to move fast if he spots an opening.

His instincts tell him that another enormous moneymaking opportunity is about to present itself, what he calls a "slow pitch down the middle." But, at 61, wealthier and happier than ever before, Rainwater finds himself reacting differently this time. He's focused more on staying rich than on getting richer. But there's something else too: a sort of billionaire-style civic duty he feels to get a conversation started. Why couldn't energy prices skyrocket, with grave repercussions, not just economic but political? As industry analysts debate whether the world's oil production is destined to decline, the prospect makes him itchy.

"This is a nonrecurring event," he says. "The 100-year flood in Houston real estate was one, the ability to buy oil and gas really cheap was another, and now there's the opportunity to do something based on a shortage of natural resources. Can you make money? Well, yeah. One way is to just stay long domestic oil. But there may be something more important than making money. This is the first scenario I've seen where I question the survivability of mankind. I don't want the world to wake up one day and say, 'How come some doofus billionaire in Texas made all this money by being aware of this, and why didn't someone tell us?'"

Global imbalances, the U.S. dollar, unsound fiscal policies, raging commodities markets, a real estate crash, and Rome burning all seem to be manageable, but an economic tsunami as the world runs out of oil?

That sounds like something that we should keep an eye on.