The stock market was falling, the Government spent a quarter of a billion taxpayer dollars to bailout selected financial companies, and plans were being made to spend almost $1 trillion dollars on the bad debt still floating in the market. While all this is happening House Speaker Nancy Pelosi is trying to promote increasing the debt of the nation even more. How kind.

House Speaker Pelosi, who still has not publicly acknowledged her substantial investments in alternative energy, is now pushing a $50 billion stimulus plan which is similar in some ways to they prior $168 billion stimulus plan that was enacted earlier this year. That early stimulus check failed to do anything except push-off the eventual downward trend in the economy.

I was never in favor of the stimulus check plan. It was a waste of money. With the problem of foreclosures and slower growth the initial checks were used to pay down on debt and mortgages, as opposed to the purchases of new goods that was hoped for. Which seemed obvious to me.

This time Pelosi wants to spend the money

“…that would fund road, bridge and other construction projects, help low-income families pay upcoming winter heating bills, give more food stamps to the poor and help states pay the higher costs of health care for the poor.”

This plan is a little bit smarter than the first but still does nothing to help the people that need it most. Unless you work in construction building a road or bridge will not directly affect you. So that is a waste, and money best spent at the local or state level. Giving poor people more food does not help them learn skills or get jobs that will help them not be poor anymore. Though I agree letting people starve is not nice, in the long run it only trains them to rely on the Government more, as they have been trained to do since the 1970’s.

Of course another problem about the higher costs of food is directly tied to Nancy Pelosi’s investment portfolio. As is the higher cost of heating oil. Nancy Pelosi has held off discussions of domestic drilling for nearly the whole year so far. She has supported everything that will limit this drilling. She wants to build up alternative energy exclusively.

It will take at least 10 years, if not more, to effectively create any alternative energy sources. The one source currently being pushed is corn-based ethanol. Because it’s based on corn food prices are going up. Because only 5 states in the nation have pumps with ethanol, and the fact that only 2 allow public purchases there is a glut of ethanol. And Government mandates will increase that glut by 60% next year.

So effectively, Democrats and Speaker Pelosi are hurting the poor with their plans, and this additional stimulus plan is a band-aid on the wound they inflicted.

I have to wonder how this stimulus plan will help anyone. I have to wonder how this will do anything more than just temporarily hold at bay the problems Democrats have enforced in the nation.

Will this bill pass? Of course. Politically the timing is perfect. The Government is already bailing out the financial sector for $1 trillion, what’s another $50 billion. And how bad will a Presidential candidate look if their Party refuses to pass a bill that targets the poor. The average American does not connect one dumb political idea with another, nor do they see the connection of all these things to the domino effect they create in the future. So it will happen.

Of course that means that the Government will swell further, and the economy will worsen. And the taxpayers will become poorer, at all income levels. These issues are not a rich versus poor issue. If the economy is bad, every American is affected. And the plans being put in place are just trying to push those problems off the minds of Americans till just after the election.

Speaker Pelosi is deceptive in her refusal to acknowledge her personal benefit from her politically based ideas. Senator Obama, in supporting this idea, is ignorant of the real fundamental issues causing the problems. Democrats are too absorbed in political gain to deny this act of futility.

Still never fear, this bill will pass. It will also do nothing to benefit anyone. Especially when crude oil prices increase over the winter as they always do. Especially as food prices go higher as more ethanol is created and sits unused. Especially as domestic drilling sits on the background delaying any potential help it can garner to the public because its ultimate benefit won’t happen for several years (just as alternative energy will take a decade or more to be effective).

But not to worry, bigger Government, larger wastes of tax money, increased national debt, and inept plans from Congress are ok by Democratic standards. Just elect Senator Obama and continue a Democrat-led Congress and they will ensure that the Government will take care of you more; instead of you taking care of yourself. Because they know better. Just look at their record and you can tell.

Labels: Congress, Crude oil prices, Democratic Party, ethanol, Nancy Pelosi, Speaker of the House

Back when I was a stockbroker (I know, it’s a bad word today) I had a buddy that love to quote this old brokerage saying.

“Bears make money, Bulls make money. But pigs just get slaughtered.”

Obviously the Board members of AIG, Lehman, Bear Sterns, Washington Mutual, and more than a few other financial companies didn’t know that saying.

But the blood is in the water and panic is in the streets. Ok, enough of the sayings. The fact is that the financial markets are screwed right now. We have hit my target of 10,800 on the Dow Jones Index – though not in my timeframe. My target of foreclosures has been exceeded, currently targeted at 9%. And my list of probable factors are being checked off 1 by 1.

So far:

1. Confidence in all financial will go lower forcing the need for more liquidity
2. Several institutions will fail - focused mostly on those dealing with housing markets first
6. Home foreclosure will hit 5.5%
11. Republicans will be blamed

Now that is only 4 out of 15 on my checklist, but they are the big ones. Gold is rising as a hedge to the dollar and to protect assets. As is crude oil. The Dow has nearly hit my December target of 10,200.

So what do we do?

I say buy. There is no greater time for profit than when everything is in a freefall down. Of course picking your time and which stock is essential. I like the financials, because the winners will rally strongly once things settle.

I would avoid Citigroup. They insure their own product and had massive exsposure to bad mortgages. I would avoid Insurance companies since I expect that regulation restricting their abilities to own other assets will be restricted shortly.

But what else is there to buy. In every down market something always goes higher. And there are always leaders on the way back up.

Coal is a great area. Energy is one of the top 5 issues on the minds of voters. Politically it’s a go to industry. Increasing coal use is positive because it means less foreign oil, increased business domestically, increased international trade, and cheaper energy prices to consumers.

Also if coal is liquified then we see the potential for a fuel that is carbon-nuetral as compared to oil. The cost of this process is about $35 per barrel equivalent to oil. That means a savings of some $55 or more dollars per barrel at current prices. Yet at this moment production is minimal.

And coal is plentiful. At current energy consumption rates there is enough coal to power the entire world for 57 years, or just the U.S. for 164 years. And did I mention that the U.S. has the largest reserves in the world. This says nothing of the coal-bed methane that is a potential energy source as well.

A couple of interesting names in the sector include:

Arch Coal
International Coal
Walter Industries
Peabody Energy
Patriot Coal
Massey Energy
Alpha Natural Resources

Now if we are seriously looking for options in this difficult market, taking into consideration political advantages, energy needs, stability, domestic economic benefits, and isolation from the turmoil of the financial markets we have to look at coal. It just seems like smart money to me.

The financial industry will be merging and bouncing around. There will be regulation and political fights about who is doing the right thing. The dollar and crude oil and gold will get stronger or weaker and then back. Smart money looks at panic and sees the road to profit in the future.

Eventually, perhaps even now, financial stocks are attractive but you will get lumps in the near-term. Gold is too emotional. Crude oil is where everyone is trying to get away from. But you like to get on the internet right? Like lights at night? Want to watch TV and stay warm? Energy is the answer, and Solar, wind, biomass and other alternative energy sources don’t exist – nor will they for at least a decade.

It makes sense to me. So like I used to say as a stockbroker

I love life!

Labels: American economy, clean energy, coal, Crude oil prices, Dow Jones Index, financial news, stock market

I ran across an interesting article and comment just before I decided to drop off to sleep. I will share my response with you and you can tell me what you think.

The original post is LET THE ENERGY GAMES BEGIN. The comment was:

Rick Says:
September 11th, 2008 at 2:05 am e
Please give me a reference to the statement that “George Bush’s own Energy Department has said that if we opened up new areas to drilling today, we wouldn’t see a single drop of oil for seven years…”
I want authoritative facts so I can warn others that it is not a quick fix to the high gas prices as republicans want to mislead them to believe.

My response is

Rick,

I did not write this post, but I am very aware of the issues it discusses. And I wanted to take a moment to address what has been said so you have a full understanding of what is before all Americans.

It is a fact that crude oil prices have increased roughly 1000% since 1972. It is a fact that oil usage in the U.S. has increased dramatically over that same time period. And it is also a fact that Democrats have long sought to prevent domestic drilling.

But to say that only Republicans are at fault for the current, and future, dependence on oil would be a lie. Inaction by both Republicans and Democrats since the 1970’s are the cause of the crisis. Neither side has effectively presented a plan of action, nor explained to the general public the cost of failing to seek a new alternative.

Currently America will spend some $700 billion on foreign oil. Part of that reasoning is due to the idea of using up foreign sources of oil while maintaining reserves for the future – ensuring the continuation of the American quality of life. That reasoning was solidly in place 30 years ago, and far less so today.

Another reason has to do with ethanol. The U.S. chose to use corn as the base for ethanol, whereas other nations have chosen and effectively use grass and sugar. All these bases for ethanol result in a fuel that is only 75% as useful as gasoline, thus requiring more fuel to be burned. In addition there is a debate on whether ethanol production is amplifying the dead-zones found in the Gulf of Mexico. Lastly by using corn as the base food prices have been forced higher, which is a core inflation factor.

Oh by the way, there is currently a glut of ethanol, with a mandate from the Government to increase that glut by 60% next year. Ethanol is currently available only in 5 states, of which only 2 allow its sale to the public (those 2 being Illinois and Michigan).

Solar energy, geothermal, wind, biomass, oil shale, and all other alternative sources at this time are either ineffective or inefficient.

Because of these facts, the only options that will effectively provide the energy that America requires to maintain it’s current quality of life and allow for research and development of new energy sources are coal, nuclear, and oil.

Coal is available, and starting to gain greater interest though many ecologically sensitive groups are against its use because even the latest developments create too much carbon dioxide and residue.

Nuclear has long been an energy source that Democrats oppose. Fear, without regard for advances in science and safety, and political preferences have held back the development of any new nuclear plants since the 80’s. This is in the face of significantly greener nations like France that use this as an energy source.

Thus we are back to oil. If we are to maintain current energy usage oil is the only logical and constant source. Since dependency on foreign oil is expensive and unreliable domestic drilling makes sense. The money saved can be used to fund alternative sources of fuel.

But will domestic drilling tomorrow cause oil prices to drop tomorrow? Yes and no.

Crude oil is priced like a stock or more accurately an option. Thus the price reacts in advance of actual events most of the time. When OPEC cuts production the price of oil rises long before the supply is affected. When a nation that produces or ships oil is under strife or war the price fluctuates whether production is affected or not.

So on that basis the knowledge that domestic drilling will decrease the demand by the largest buyer, prices will drop for a period of time until other buyers step in to make up that difference. If OPEC does not just reduce production to maintain current prices.

But more importantly if nothing is done today, as it was not in the 70’s, 80’s, 90’s, and on then you are guaranteed to have higher prices 2 years from now as well as 10. And where will the alternatives be then? As more money, maybe $1 trillion dollars a year or more, goes to foreign nations, where will America get the extra money to fund the 2nd, or 4th, or 7th year of research?

And lastly I want to inform you of something that many Democrats, particularly Speaker Pelosi have not made public. Nancy Pelosi makes money every time alternative energy is funded. She owns a substantial position in alternative energy stocks. It’s to her benefit to not allow domestic drilling. It fills her pockets with money every time that the debate lingers.

How is Nancy Pelosi different than the charges made of Republicans when she is in the pocket of Big Wind?

So to answer your question is oil going to resolve all America’s fuel needs forever? Of course not. Will domestic drilling drop the price of crude oil significantly tomorrow, or short-term? Not overly likely, though some effect will happen. Do Republicans understand this, and the alternative? More than you are giving credit to.

But the real question should be this, what alternative is being proposed by Democrats that will ensure the energy needs of America now, and provide any hope of reduced cost and increased energy in the next 2 years? Or 4? Unless you don’t mind not heating your home during the winter, or being unable to use the internet when you wish.

Oil is not the answer, we can all agree on that. But by using oil, particularly domestic oil, we improve our ability to create new sources of energy.

Labels: alternative energy, Crude oil prices, domestic drilling, ethanol, Nancy Pelosi, nuclear energy, oil shale, OPEC

Recently I mentioned how I felt that having Speaker Nancy Pelosi speak on the first night of the Democratic National Convention was a mistake. I felt it was a massive strike against Senator Obama.

“Speaker Nancy Pelosi may look good to the women that only care about having a woman’s face in a leadership position; but anyone that has followed what the Democrats said in the 2006 mid-term elections may have a different opinion. The 110th Congress is a complete failure. The Democrats have failed to do any of the things they promised in their 2006 campaigns. And Speaker Nancy Pelosi led the charge to stalemate.”

I continue to feel that way, and I believe that strike 2 has just been dealt.

“Which brings us to Madame Speaker’s 2007 financial disclosure form. Schedule III lists “assets and ‘unearned income’” of between $100,001-$250,000 from Clean Energy Fuels Corp. - Public Common Stock.” Clean Energy Fuels Corp. is a natural gas provider founded by T. Boone Pickens.

“She, and other investors, stand to gain a substantial return on their investment if gasoline prices stay high and municipal, state and even the Federal governments start using natural gas as their primary fuel source. If gasoline prices fall? Alternative fuels and the cost to convert fleets over to them becomes less and less attractive.”

CLNE also happens to be the sponsor of Proposition 10, a ballot initiative in Pelosi’s home state of California to dole out a combined $10 billion in state and federal funds for renewable energy incentives. Namely: Natural gas and wind.”

So effectively we see that Nancy Pelosi is in the pocket of alternative energy companies. It’s basically the same claim being made by Pelosi and other Democrats against Republicans. And it’s just as bad as what they say the result is with Republicans.

Speaker Pelosi has walled-off any discussion of domestic drilling for oil. She has refused to allow any votes on the subject. And according to her most recent comments on Larry King she will only consider possibly allowing a vote on domestic drilling IF it also includes alternative energy incentives.

Effectively that means that Speaker Pelosi wants alternative energy to get more money to earn more money for herself. The higher the cost for oil, the better her alternative energy stocks will do. And the American public be damned.

Of course many other Democrats believe in this same style of system as well. Senator Obama wants to increase electricity costs, is against domestic drilling (though he has suggested he might be open to drilling in recent speeches – campaign speeches designed to get him elected), and has stated that higher oil costs is good because it will force people to use less oil. Don’t mind the fact that higher energy costs mean more Americans will lose their homes and businesses, and will force a slow down in the economy that makes unemployment higher.

But look at it from a different point of view. Senator McCain stated at 4:33pm on Aug 13, 2008 in a news conference that creating nuclear energy plants would create 700,000 jobs. McCain is also more in favor of domestic drilling.

If there was a move in the nation to do domestic drilling, building nuclear plants, and alternative energy – and each of these ideas would employ 500,000 Americans – there would be a boost to the economy and a reduction in the cost of oil and energy. Speaker Pelosi would make money on her stocks (though not as much) and so would oil companies, utilities, 401K’s, and the average American (via energy cost savings).

But according to Nancy Pelosi and other Democrats, domestic oil is a bad thing since it means oil prices would drop. Also nuclear energy is opposed as well. That’s 1,000,000 American jobs they don’t want to create, at least. That means that unemployment will go higher since businesses of all sizes will not be able to afford the higher cost.

Of course Nancy Pelosi will make more money though.

So I will return to my original thought. Is having Speaker Pelosi speak at the DNC a positive? Especially since she represents a Democrat-led Congress that not only has done nothing they promised in 2006, but is also actively looking to hurt American families. While lining her own pockets with more money.

Strike 2.

Labels: Congress, Crude oil prices, Democratic National Convention, domestic drilling, energy alternatives, Nancy Pelosi, nuclear energy, Senator Barack Obama, U.S. economy

Oil is in the middle of the summer breather, gold has backed off the stellar highs reached in the 1st quarter. Inflation is in the background, and the mortgage housing crisis continues to hinder the financial markets. Well back on July 2nd I mentioned that

“Energy shortages, most notably in South Africa but also in North America and Chile, forced supply down artificially helping to boost prices. But that is a problem that has been in the works of being fixed since the 1st quarter. Once it is done supply will rise to meet the growing demand and be a signal for profit taking.”

It seems I was right. So what might an investor do and look forward to?

Mining stocks continue to hold one of the better risk reward scenarios for a long term outlook, I think. While many sectors of the markets are slowing there is huge potential in the mining sector for reasons most are not discussing now.

Because of the huge run on gold and precious metal prices early in the year, many of the mining companies took the opportunity to horde cash and survey the landscape. Several of these companies are taking the current indecision in the markets to use that cash to acquire some of the competition. Lonmin was recently offered a takeover valued at roughly $2.5 billion. Vale of Brazil is looking for a potential match with $12 billion in its coffers, while BHP Billiton and Rio Tinto are doing merger dances.

But a merger is only one reason why the current lull in metal demands is a buying opportunity in mining stocks. China and India are far from peak of their demand for metals. Both of their economies are in growth phases and require more raw resources.

China is not only using more metal, they require much more energy. Already China has grabbed the excess crude oil that has become available from the slowdown in the United States. Soon they will have increased their need enough to be driving up crude oil prices even if America lessens its demand via domestic drilling or increases alternative fuel sources.

And of course there is the aspect of fuel sources outside of crude oil. The world is looking for options and needs energy until a renewable alternative becomes viable. That means an increase in mining and processing of oil shale, coal, and uranium. While nuclear has its detractors it provides too much energy to be ignored, and is relatively clean. A new process for coal is in talks in America, making its use cleaner and a readily available domestic stopgap for crude oil. And oil shale has a potential that still remains unknown on the large scale.

Each and every one of the reasons above is likely to show their influence before the end of the year. With the political situation in America poised to change energy consumption trends after the Presidential election, mergers creating more efficient (and profitable) mining companies, demand pressure from China and India even a slight increase in crude oil prices (as winter approaches) or a rush to gold and other precious metals as a hedge for inflation and/or weak markets means that mining stocks are well poised to outperform virtually all other sectors by the end of 2008.

Labels: BHP Billiton, China, coal, Crude oil prices, India, Lonmin, mining stocks, nuclear power, oil shale, precious metal, presidential election, Rio Tinto, uranium

The recent ads by Senator John McCain’s campaign really are interesting. If you haven’t seen them I present 2 that I believe are intelligent, humorous, and raise real questions about Senator Barack Obama.



In this video we are presented with the obvious nature of Senator Obama’s rockstar celebrity status. That status has been decried by the major news media in no uncertain terms. And there is no question that Senator Obama has a presence that politicians dream of having. His ability to speak to crowds in America, or overseas, is unmatched – most obviously in comparison to Senator Hillary Clinton or Senator John McCain.

But it also asks a very serious question. What is the major news media not finding out about this potential Presidential candidate?

Objectivity is the hallmark of the news media, or at least it used to be. The impartiality of the news meant that the truth would be presented, no matter what the populace was hoped to be lead to believe in a veil of polispeak. Pundits were supposed to be the informed watchdogs for the citizenry, deciphering the polispeak and ignoring the election geared parade of kissing babies and shaking hands.

If the news media is capable of being beguiled, then how is the average American with an hour of time in their busy day supposed to work through whom deserves the Presidency? What issue that may be of importance to you and I are the major news media ignoring, or worse deciding we should not know so it cannot influence out vote?



And here the question of celebrity status is again questioned. Is Senator Obama as vapid on political issues as Paris Hilton is on driving? Is Senator Obama more concerned about entertaining crowds worldwide than addressing issues domestically, like Britney Spears is apparently more concerned about a good party than her children?

While Senator Obama took a whirlwind tour of Iraq, Iran, and Europe he has avoided the problem at home of domestic oil drilling. The Democratic Party has worked hard to maintain his stance that increased domestic drilling is bad and will not be allowed. Speaker Nancy Pelosi has gone so far as to block any kind of vote on the matter, preventing Representatives across the nation to vote as their constituents have contacted them and instructed them to do. Why? Because a celebrity Obama has enough clout and likeability to talk Iran and the Middle East into lower crude oil prices?

And recall that Senator Obama himself acknowledged that all Iran needs to do is block the Straight of Humus and oil will go to $300. Yet he also believes that he can talk to Iran, a nation that seeks the utter destruction of America for over 30 years, and prevent that. Even though the world knows that a higher oil price will harm America and benefit the Middle East. And Senator Obama does not want a back-up plan?

Actually his back-up plan is to raise taxes, which means higher prices as well. Because he believes that forcing the price higher will force Americans to use less energy. He is right but that also means that more people will lose homes, jobs, businesses because of the higher cost. You can’t use more energy is your small business is shut-down, along with all your employees. Is that a good plan?

I’m not saying that the ads of Senator McCain are correct. But I am saying that they bring up real and important questions. Do you have the answers? Are you sure?

Labels: Crude oil prices, gasoline prices, Nancy Pelosi, Polispeak, political ads, Presidential election race 2008, Senator Barack Obama, Senator John McCain

Senator Obama is quite a man. I mean that seriously. It takes quite a man to step up to the plate for a position that most my age or above never expected to happen. He is facing down the most difficult hurdle an African American has ever come against in this nation’s politics and looks to be competitive.

Though with that said I have to say that I wouldn’t vote for him. Historical importance and all, he is not ready for the position – but he is damn close.

My problems with Senator Obama are purely on his political experience and policies. In terms of his presentation, the fact that he is breaking barriers and making history are all things I deeply respect about the man. I find him charismatic, and a capable public speaker. His ability at polispeak is unmatched by neither Senator McCain, nor any of the past Democratic primary candidates he beat.

But that is not enough to be President.

I’ll give you an example. Senator Obama visited Iraq for less than 2 days, after 2 ½ years since his last visit of less than 48 hours. That is not fact finding, nor is it being open minded to changes that he opposed. That is building voter interest on the backs of the soldiers in Iraq. The same can be said of his time in Afghanistan.

Senator Obama has not changed his position. He never was going to. Thus the trip, with enough media coverage to rival the President, was just a new take on the shake-hands-kiss-babies politicing. He got into the race saying he would remove all the troops in Iraq in his first term, then shifted to a 16-month policy that will still leave some unknown number of troops in Iraq, and after his trip he still maintains that policy.

But as I have said to many people and in this blog, how do you expect to win a fight if you tell your opponent that you will stop before it’s over? If this were boxing, Queensbury rules all the way, but this is war. When America left Saigon did anyone view that as a win? Besides the North Vietnamese. Can anyone give me a reason to believe that Al Quida and any other insurgents won’t just bide their time for 16 months to end, if Obama is elected President, and then rally to make Iraq a bigger mess than it is?

If people want to praise Senator Obama for his unyielding position on Iraq, which essentially calls for retreat and means that every orphan and anyone who lost a loved one in Iraq will be gunning for Americans within 5 years of our departure, even if it is not popular then how can they not praise Senator McCain for his unyielding and at times unpopular stance to win the war? Mark my words, not winning in Iraq means that more American lives will be lost, and in our nation not overseas.

But there is also the issue of domestic economic instability. The housing markets are tanking, as are many financials that facilitated this drop. Senator Obama is looking to speak with advisors (though not 300 as he uses for foreign policy which is impractical) that include Treasury Secretary Robert Rubin, former Federal Reserve Chairman Paul Volcker and billionaire investor Warren Buffett.

Obama said in his meeting with advisers he expects to ``get their read on where the economy is going,'' and fashion some ``additional steps'' to address the short-term economic and financial and housing issues.

Robert Rubin helped to advise Senator Hillary Clinton. While many have chosen to forget, I recall that her campaign ended in debt of some $20 million. That’s after she loaned herself in excess of $6 million for her campaign. Somehow I think Rubin’s advice was ignored and/or faulty, you can pick which.

Warren Buffett is the greatest investor ever. He has made billions via investing. Yet he does not give one extra dime to the government than he has to. He has never donated any money to the I.R.S., but he has been very vocal to say that taxes should be raised. He is so sure that the government should have more of his own money that he is donating the bulk of his billions to a charity, run by Bill Gates – another man that made billions via business and investing. This tells me that he does not believe that the government can efficiently use his vast fortune to the benefit of Americans, whether Democrats or Republicans are in charge.

Paul Volcker, the predecessor to Alan Greenspan – the man who tried to get the Clinton Administration to do something about the internet bubble, is best known for ending stagflation and creating a recession that killed farming. To recap for those younger than myself Volcker reduced the inflation rates at the end of President Jimmy Carter’s term (13% in 1979) to reasonable levels during the President Regan Administration (3% in 1983). He also helped increase unemployment levels to those near equal to the Great Depression, bankrupted farmers, and generated the most protests that any Federal Reserve Chairman has ever received.

Senator Obama’s choices make a few things clear. It seems that his intention is to raise taxes (not just on the rich as he has already voted to raise your taxes this year), spend your money on policies that will feed the hungry as opposed to help them be able to feed themselves, and drive up prices for energy and oil.

The last 2 come from the fact that Senator has voted the most extreme liberal of the entire Democratic Party. He is not bi-partisan according to his record. Thus the Democratic Party opposes any domestic drilling for oil, preferring to use corn ethanol. That means that we will continue to drive up the price of oil – funding some of the enemies of America with more money than ever before – slowing the economy as businesses contract to offset the higher energy cost, and the cost of food will go higher since the price of corn is increasing. That’s inflation as I understand it. That’s hurting the average American. Higher taxes, higher energy costs and higher food costs – that is what I understand he is being advised to do.

There are other questions about Senator Obama that I have, but these are some of the more prominent right now. This is what the news media wants America to focus on. And just these reasons are enough for me, even though I have several others.

But is that what you want? Is this what you expect from a President after the polispeak is gone and action is required?

Labels: Bill Gates, Crude oil prices, Democratic Party, ethanol, Iraq War, IRS, Paul Volcker, Presidential election race 2008, Robert Rubin, Senator Barack Obama, Warren Buffett

Well how much fun are you having today? If you hold investments, it may not be a fun day at all.

Back in the 4th quarter of 2007 I said I believed the Dow Jones Industrial Index would hit 11,000. I thought this would be a move in the late 1st to 2nd quarter. I was wrong… on the timeframe. But this is not a pat yourself on the back kind of moment.

With Indy Mac having failed and fears rampant over whether Freddie Mac and/or Fannie Mae will follow there should be no doubt that the Dow will cross into the 10,800 area on Monday. Add crude oil prices that are continuing to rise on fears from Iran and you get a bad situation. But perhaps the real culprit for this current situation is the Fed (Federal Reserve).

The Fed has been providing banks extra money to ensure their solvency, but not requiring that loan reserves be increased. It’s kind of like stopping a leak in your tub by adding more water. The problem is not getting fixed and may get far worse. And all the panic about the mortgage industry seems to have done nothing but whip up polispeak from political candidates and political parties, each looking to sway voters.

Loan reserves must be raised at all financial institutions. That especially means Fannie Mae and Freddie Mac. And several institutions need to fail. That of course means that some people will lose their homes. Nothing can, or should be done about that.

When I some will lose their homes I don’t just mean the roughly 4% of homeowners that are in default. I include in that group those that will fail this winter due to the cost of heating oil increases. I expect that in total some 7% of homes are in danger of foreclosure this year. While it’s not a nice thing to say, they need to lose their homes for the economy to survive.

This is not unlike the enormous wash-out that occurred when the internet bubble broke in the stock market. Money was lost, as it should have been, and opportunities were created. Those that made bad financial decisions, whether corporate or individuals, lost and others benefited from that loss. It’s a standard cycle in the markets.

Of course what is likely to happen is that Congress (with it’s 9% approval rating – sure to go lower) will take taxpayer money and bailout homeowners and financial institutions alike. Thus more water will fill the leaky tub. Undoubtedly the current Administration will be blamed (even more than they should) and the war in Iraq (and possibly Afghanistan) will be identified as the cause of all these ills. Which is false.

The outcome will probably be a surge for Senator Obama, who prefers a bailout. This may lead to him being elected and higher taxes to pay for that bailout. And if anyone thinks a bailout of this size will be limited to just the top 1% of the nation they are insane.

I believe, looking at current factors several things are highly probable:

1. Confidence in all financial will go lower forcing the need for more liquidity
2. Several institutions will fail – focused mostly on those dealing with housing markets first
3. Interest rates will increase by 1pt by the end of 2008, increasing another 1pt early in 2009.
4. Crude oil prices will jump to maybe $160 a barrel by mid-September as winter starts, with a commensurate move in heating oil prices.
5. Gasoline will reach $5.15 a gallon
6. Home foreclosure will hit 5.5%
7. Bankruptcies will increase by 3%
8. Higher energy prices will be blamed for the further slowdown in corporate profits and significantly lower (negative) holiday sales in the 4th quarter.
9. A Democratic Congress will be re-elected
10. Senator Obama will likely be elected
11. Republicans will be blamed
12. Taxes will be increased for all incomes by 3% by 2009
13. Corporate taxes will be increased by 10% early in 2009
14. Inflation will soar unchecked by 3 - 5%
15. Unemployment will grow to 8.5% by December 2008

While each of these items may or may not happen they are all interrelated. I expect each item to happen, at least to the degree I stated, generally in the timeframe given.

As money tightens, gold will be a hedge and prices for all precious metals will soar again. Credit will get severely crunched, and credit card rates will fly. The debt load on the average American will increase from the current $6,000 to $8,500. Most of this increased debt will be from higher energy costs. Thousands of small businesses will shutdown.

As a result of all these things I expect that the Dow Jones will drop to 10,200 by December. If I am correct about Congress and Senator Obama – for the reasons stated – then I further expect a drop to 9,300 during 2009. A significant bear market indeed.

The main problem is that the solutions being looked at now raised taxes and increased liquidity, fail to resolve the actual problem. And the combination will weaken the dollar, to a point where holding U.S. bonds is unattractive. I won’t even mention the increase in retirees and Social Security.

But there is opportunity. I see the housing markets as a great buy, for those willing to hold for 5 years. Buys in the secondary city markets will probably do best having a lower purchase cost and holding value better.

Several financial stocks will be excellent buys. Some have far better balance sheets than others, but will be blasted by the same investor fears as those in bad shape. Companies like Citigroup are trouble spots as they reinsure their own loans and thus hide them better on the balance sheets. Financials will lead the markets down, but they also will signal the start back.

Coal will likely start to regain interest in the quest for alternative energy sources. I expect nuclear energy will also get a push, with at least 1 new nuclear plant being authorized to be built in 2009. I expect a call to switch to ethanol produced by grass and sugar to go initially unheeded until mid-2010. Further harming the ethanol push is the fact that there will be a glut of ethanol by mid-2009 through 2011.

Bond rates will be more attractive in 2009 than today with the likely increases in interest rates. Of course inflation rises will remove that benefit.

There may be other sources of opportunity but they will be guided by factors including but not limited to:

Iran
Iraq and Afghanistan wars
Crude oil prices
Heating oil prices
Inflation
Unemployment
Manufacturing and Industrial layoffs
Retiree growth rates
Healthcare costs
International political stability
Another terrorist attack on the United States

That is the outlook that I have based on what is currently ongoing in the world today. Some of this is just my on interpretation, some my deduction. But I believe that if only ½ of my expectations occur, the general outcomes as stated are accurate.

But look around and determine your own answers. Better to be prepared than taken by surprise.

Labels: Congress, Crude oil prices, Dow Jones Index, election 2008, ethanol, Federal Reserve, Freddie Mac, gold stocks, heating oil, real estate, Senator Barack Obama, stock market

As I write this President Bush is expected to discuss offshore oil drilling in America, and the opportunity of Oil Shale mining. In recent years I have heard a lot about oil shale and its mining, but I really didn’t know anything about it. Like most I expect the thought of oil shale made me think of a rock that is filled or comprised of oil. That is not the case.

Oil shale is a fine grain rack filled with kerogen. In heating the oil shale a gas from the kerogen is released which can be used in heating homes and creating power, or the gas can be cooled to create a synthetic petroleum-like oil. The use of that oil is similar to the uses for crude oil, but they are not the same thing.

How much oil shale is there, and is anyone using it? Those are the next questions I had. The answer may well surprise you as it surprised me. There is estimated to be 3 trillion barrels of oil equivalent of oil shale in the world. The United States is one of the major sources of deposits in the world with 1.8 trillion barrels equivalent under Colorado, Wyoming, and Utah. This is in comparison to the 267 billion barrels of oil estimated in Saudi Arabia (as of 2006). And currently first world and emerging nations including Germany, Russia, China, Israel, Brazil, and Estonia all have varying degrees of oil shale industries producing energy and fuel. Who knew.

Now consider this, mining companies - such as BHP Billiton, Anglo American, Kazakhmys, Vedanta Resources, Xstrata – and oil companies have been having a strong year as energy is on the forefront of political and investment minds. With the rise in speculation of crude oil prices, rising gasoline and home heating oil prices, and calls for alternative energy sources oil shale stands to be more actively in the public domain than ever before.

Now since there is no oil shale market (yet) and given that mining shale is a very different process from drilling for oil, I would imagine that several oil companies will be looking for acquisitions and joint-venture deals with mining companies that have the ability and experience in this field. Schlumberger, Shell, EnCana, Chattanooga Corp, Fushun Mining Group, Tosco Corporation, Petrobras, Viru Keemia Gripp are just a few involved in some aspect or projects with oil shale. I doubt that the number of companies will decrease in the coming years.

Opportunity abounds for the investor and individual that seeks it. How you take advantage of this potential is up to you. But I would expect that oil shale will become a greater factor in at least American energy future plans than ever before.

Labels: Anglo American, BHP Billiton, Colorado, Crude oil prices, energy alternatives, Fushun Mining Group, Germany, kerogen, oil shale, Petrobras, Saudi Arabia, Schlumberger, Tosco Corporation, Utah

How bad is the energy situation in America? We all are aware of the increases in the price of oil in the past couple of years. In fact there has been a massive amount of attention to every rise and fall of the price per barrel. That attention has of course translated into greater speculation fueling great price fluctuations, happier members of OPEC, richer brokers, and tighter margins for virtually every type of business in America.

But how bad is it? Does this compare to say the 1970’s and that oil disaster? Actually very well. In fact there is virtually no comparison. From 1970 to 1980 the price of oil went up 1566%. Again that was an increase of 15x in 10 years or 1.5x every year for that decade. In the past 10 years oil has increased a mere 300% or 3x counting today’s high.

So what other factors have been involved in the run up between then and now? Considering the fact that oil consumption in America has increased 21% since 1980 alone (I couldn’t find data since 1970). Of course that is 28 years or .75% a year. So that does not explain the price increase, especially when you consider that the price of oil only increased 33% from 1980 to 1990. So there must be another reason.

Perhaps it’s the fact that there is a limited supply of oil in the world. Knowing this, and the fact that the Middle East has no other major exportable good, it makes sense that as demand continues to be steady or increase the price will rise. But that still does not explain the recent dramatic (moreso due to media influence) increase.

Until you look at speculation. In the 1970’s perhaps 15%, maybe 20%, of the nation was involved actively with the stock market. In the 1980’s there was a huge increase in trading of everything, backed up with a healthy helping of movies from Hollywood fueling interest (recall Trading Places, Wall Street, Other People’s Money). As a result the investing populace doubled. Then with the tech bubble we saw the numbers swell to around 60-70%.

As these numbers swelled, more and more people became aware of alternative investment vehicles. Commodity trading along with spot trading became the new penny stocks. With an upfront cap of only 5% of the total investment oil was primed to run as the housing market had its bubble burst. And here we are today.

The only other major factor has been the fact that since the 1970’s neither Republicans or Democrats have done anything about America’s energy needs beyond polispeak. Every administration has talked about alternative energy sources, and funded no research. Each decade has passed without increases in domestic drilling while OPEC made more money. As the years passed the number of oil refineries has dropped to roughly half as many in operation today as in 1970. And speculators made money.

Why is America in an oil shock, and complaining about gasoline prices (which have had a fractional increase in price as compared to oil) – not to mention soon to be reeling from home heating oil prices? Because we have politicians that have been more concerned with fueling special interest groups (eco fanatics and oil companies alike) rather than the average American.

So what is our answer? What are we the people going to do? We can either sit back and accept yet more polispeak about creating advances while ethanol kills the Gulf of Mexico and sits unused in the 5 states that actually have it available to the public or we can get real change. We can either leave domestic oil sources untapped and penalize our economy or use oil and fund research for other sources. We can either do something or suffer the consequences of inaction and polispeak promises.

That is the choice in front of us. Every other option is just a stopgap answer that will placate anyone with a short memory and nothing else. Because the energy situation in America is hardly bad…yet. But soon it will be a real crisis, and one that will give this generation and the next an understanding of the 1970’s that will make them pray for alternative day fuel lines.

Labels: commodity markets, Crude oil prices, ethanol production, Hollywood, Middle East, OPEC, penny stocks, Polispeak, stock market

Lately my conversations with ultra-liberals have began to take a repetative tone. I’m hearing complete paragraphs of conversations that are verbatim. I’ve begun to wonder if it’s some kind of Ipod track that they have hooked up to their mouths. It’s as if their brains have shutdown to any original thought or the concequences of the party line.

Ok so some of the conversations have not been quite that bad. Some. But there have been massive misconceptions, faulty facts, and a complete disregard for consequences.

So let’s look at a couple of common quotes.

Oil companies are bad for making big profits.

Since when is making a profit a bad thing? Is that not part of the American dream? Isn’t that why every small business in America was created?

But go deeper. Beyond the jealousy of the profits they make, look at the impact they have. Oil companies do not make more money with higher oil costs – OPEC does. Gasolines price is ~60% based on the cost of oil. In the past year oil has more than doubled in price; yet gasoline has only risen ~40% in the same time. That means the oil companies are doing a good job of keeping the cost down.

The profits that oil companies make is not isolated to 2 people as ultra-liberals would like you to think. Millions of mutual funds and IRA’s hold large positions in these oil companies. When they make a profit (which is their job) their stock goes up and investors and retirees have more money. Capping their profit in fact will take money away from retirees and investors, thus hurting the average American.

Capping profits will not stop the need of an oil company from making a profit. To get that profit they will need to cut jobs and stop research into efficiancies, exploration, and alternatives. That means the unemployed in the nation will go up. That will hurt the economy. And if they cut jobs, hundreds of other companies that work directly with this industry will have to cut back too. And by the way, the price of oil will not be forced down a penny while this happens.

We need to leave Iraq now.

As I have said many times that’s not only impossible, it’s stupid. You cannot end a fight just by walking away, not after people have died. Walk away and the orphans (possibly created by the people we are fighting and having nothing to do with our troops) will turn to the only people with power in the area. A great many of those people want to kill every American because we exist. They are the same people that created 9/11 and several other terrorist acts that have failed in the over 2300 days since 9/11. Those orphans will be fed hate against America, and I will guarantee will be committing terrorist acts against us in 5 years from an immediate pullout.

Add to that the fact that if Al Quida and Iran get to boast about making the ‘cowardly Americans run away’ they will gain respect and recruits to their causes.

We will have troops in Iraq for 100 years.

Pay attention to what you are hearing and being told. Troops in Iraq is not fighting a war in Iraq. We have had troops in Germany for 50 years, Japan for 50 years, Korea for 40 years, and Vietnam for 30 years (ronding off the years). Last I checked we are not at war with any of these countries. Nor are we removing those troops and bases in any decade in the near future.

President Bush has ruined America.

How? As far as I have lived and am aware there is nothing I do today that I have not been able to do in the past. There is no restriction to travel, doing business, paying bills, dating, or any other aspect of life that did not exist 30 years ago. So how has America been ruined?

We still elect officials and create laws. We still drive cars and build homes. We still criticize the government and elected officials when they do or porpose something stupid. We are till the most free nation in the world, with tens of thousands entering the nation every year for that reason (illegally or not).

What I think is really meant by that is someone saying that does not like President Bush. I agree that President Bush may be the least articulate, least intelligent Presidents ever. I agree that he has failed the nation in several aspects. But he is not the horrendous life-threatening force that some want to see him as.

So many want to live in the past. They can’t get past the decision, made by Senators and Cogress – of both political parties – to go to war in Iraq. But that was the past, as is who to blame. The 2008 election is about the future and answers to issues happening now, not in 2002.

I want change. Real change.

This is a really stupid statement. Unless the definition has been altered since I was in 3rd grade, the 2008 elecetion guarantees change. No matter who wins, change is a fact. The comment makes about as much sense as saying that a person is “keeping it real”.

The statement should be ‘I want to change X’ or ‘I want a positive change in Y’. Better yet is the statement ‘I will change Z like this and it will be positive’. But if a politician were to say that then you might actually form an opinion on what they think and intend to do. Some would agree others not. You could lose an election (or gain a landslide) for such comments. Having a plan and a clearly stated objective is a boon and a bane.

But just ambigously wanting to change things, since that is the only predictable outcome of the 2008 presidential election, is safe and allows voters to inject their emotions. That definitely will win an election. To bad that it makes no impact or potential steps torwards improving anything. It can’t since it doesn’t even attempt to define what it will change or how.

In the 2006 mid-term elections Democrats were elected under the rally call of change. What change happened is that millions of taxpayer dollars were used to hold a multitude of Congerssional meetings on issues that never involved a single law being broken, the health of professional athletes, pointing the finger of blame at one political party or another. Please tell me how any of that prevented the mortgage crisis, put food on a table, or money in anyones pocket? But you can’t call them liars, because it was a change.

Is Senator John McCain President Bush? No. So a 3rd term of Bush is a stupid and feeble statement based on capturing an emotional response and not the benefit of the nation. Is global warming real? Probably not, but there is nothing wrong with having a cleaner world. Can you fix an economy (ie giving people more money in their pockets) by increasing the taxes they pay? It’s never worked before.

So when you think of the Presidential election think of this – How do you want to change the issues you think are important to America? How will those changes happen without hurting other Americans? Who has a plan to attain those changes? What plan is based in the reality (and not emotion) of the world today?

Labels: 2008 election, Crude oil prices, Democratic Party, Iran, Iraq War, OPEC, President Bush, Senator John McCain

As the race for the Presidency of 2009 reaches its next stage I feel it’s important to go back over several issues that were ignored in the recent past. Issues have been broadcast for days and weeks now about the character of associates of the candidates, and race and gender. Yet most pundits and major news media have seemingly forgotten the issues in their never ending desire to promote their ratings.

So let me present the issues that I have noticed are truly important to the majority of Americans.

1. The war in Iraq.
No matter your opinion of how correct we were to get into the war in Iraq, America is fighting now. Placing blame on the past decisions has kept many busy, and used up valuable energy, but resolved nothing. The issue at hand is simply this; either we win or we run away.

If we run away, the results will include the instability of the region, the empowerment of Iran, an increase in the cost of oil, likely heightened threats against Israel, and inevitably attacks against Americans and America. When I say attacks against us I mean just that, terrorist acts on varying scales killing civilians in their homes and work on our soil. Because the various factions that take over Iraq in our absence will definitely (fairly and unfairly) blame every ill on America, and the orphaned sons and daughters will eventually be coerced to seek out and kill Americans.

Conversely if we go for the win we must commit more funds and resources, risk international disdain, and lose members of our military. Ultimately we will have to have a military base in Iraq, not unlike Japan or Germany. As much as ultra-liberals may like to misquote Senator McCain’s comment, it is likely that winning the war in Iraq will require our PRESENCE over the next several decades, with some portion of that time being in various levels of actual combat.

2. Education
There is little argument that the children in public schools today are dumber than the generations that preceded them. It may not be the nicest statement, but it is accurate. Children today are less creative, active, and deductive than perhaps since the start of the industrial revolution. They are being asked to memorize various facts, yet comprehension of those facts are at record lows. Fewer know what is in the Bill of Rights, can identify North America on a map, or how to properly structure a sentence. And this is while there is unprecedented access to the knowledge base found on the internet, and more instantaneous connectivity then ever before.

Kids today are being taught less and retaining bare minimums. While this may be most obvious in cities throughout the nation, it is a national event. The long term effects of this will be devastating to the nation.

3. Economy
While the unemployment levels are hardly at levels in the 70’s many are feeling like they have less money than in decades. Interest rates are incredibly low, yet tens of thousands are on the edged of losing their homes. Average wages are up from the past and discretionary spending is high (unless you count an iPod as essential) but the average person has $6,000 in credit card debt. Few feel secure in their jobs.

Considering that crude oil prices are brushing against my prior year high estimate, gasoline and winter heating oil prices are sure to hit millions hard. Add to that the higher cost of food due to ethanol production, and that glut levels are increasing with Federal production mandates, and you find consumers with less money than may have been planned. This says nothing of the potential inflation that may be caused with interest rates as low as they are.

The Presidential candidates have offered 2 different ideas. One is to take more money from taxpayers, the other to cut taxes. While the tax increase is stated to target only the “rich” such a definition is vague at best. Recent votes in Congress have included those making $31,850 or more for increased taxes of at least 3%. The tax cut is stated as being universal, with a goal of affecting the middle class primarily.

4. Safety
National safety from internal and external sources. While some would prefer to think that America is safe from future foreign attacks, the reality of the world is that we are not. Like the best of safes, eventually someone will break in and in like manner America will be attacked. Minimizing the nature and scope of such an attack is vital. A madman with a gun or suicide bomb is unsettling, but far less devastating than airplanes as weapons, a radioactive ‘dirty’ bomb, poisonous gas, or other mass attacks.

As far as I am aware, these are the most critical issues facing America. These are the questions that need to be answered by our next President. There are other issues but these seem to be the primary ones.

This is what we need to hear the candidates answer. This is the planning that we need to understand. These are the things that will provide us the best President for the nation.

Any other reason or issue is secondary in my opinion. Even worse, the attempts by the media to grab ratings distorts the answers we need to hear and blocks the things we need to know. Answers and plans.

As this final phase of the Presidential race continues I suggest we all keep these issues in mind.

Remember you only get one vote, and once you have you don’t get a do-over.

Labels: Crude oil prices, education, Iraq War, Presidential election race 2008, tax policy, tax rates, terrorist attack

As the Dow Jones Index tumbles again, down some 200 points today, I had to look back on some of the things I’ve said recently. I can’t say I am surprised at the condition of the market, nor the outlook being discussed now. On reflecting I found that I mentioned many of these things back in November 2007.

“The Fed's huge new credit facility, announced on Tuesday, "can help in a rather small way ... but the underlying risks will remain with the institutions that borrow from the Fed, and this does nothing to change their capital," National Bureau of Economic Research President Martin Feldstein noted.

And I stated.

“I had a friend recently ask me what I thought would be happening to the economy, and my answer was it’s going to get bad. Perhaps recession bad. And I added that the current group of Democratic candidates may only make it worse.

I say this because of several factors. Not the least of which are, the housing crisis, the financial sector, the cost of oil, and potential tax ramifications based on the current plans announced by candidates.”

Perhaps I was too general. Maybe I could have been more clear.

“One broker, whom I respect and consider quite sharp [even when I disagree], had an interesting comment on my predictions. I believe that the move to junk rating of ACA, the probable $6 - 12 billion loss at JP Morgan [significantly higher than expected], eventual losses from Citigroup - which reinsures itself, oil breaking $100 a barrel, and the multiple overseas investments will all hit the market in mid-January 2008. Thus I think a move to 11,000 is more than probable.”

Maybe if could have seen what would be the effects

“The facts are that China and India need gold. Even in a global slowdown their demand has increased pressure on supply. Recession and inflation fears and a lagging stock market in the United States have not diminished though they are not leading world headlines this moment. Oil prices are foreseeable going to continue higher and place more pressure on world economies, especially if OPEC cuts production rates as expected. And the prospect of a Democratic President in America is generally seen as a negative for the stock market, further spurring a move to gold to hedge investments.”

Fine, all that having been said at points in the past, what do I have to say now?

We need to see the stock market crash. Seriously it needs to drop to my target of 11,000 I called for in 2007. And every single action by the Fed and Congress to stop this will only create a bigger and longer lasting problem.

At the moment the Government is trying to create an artificial floor for the market. The reason is to give investors a false sense of hope and a bit of political momentum. Neither is worth the problem it is creating. The Fed has reacted too slowly and in moderation thus not correcting any of the liquidity issues. Huge rate cuts may look impressive, but since they don’t have an effect for months if not a year, the short-term effect is windowdressing. A series of stagard smaller cuts (started far earlier) over a period of time is far more effective.

Injecting money into the pockets of citizens is also a waste of money. The momentum and problems are not with people failing to buy things, it’s with the cost of the things being purchased. If oil costs are up 40% then there is just that much less to spend in a discrectionary manner.

Giving people money in the middle of chaos means that the money will either go to pay immediate bills or stashed away for the possible immediate need to pay a bill. Rather, let the emotion and the weakness in the market play out and then give the stimulus. Otherwise you are throwing money down a drain hoping it will eventually clog if you dump enough. And we are weakening the dollar in the process, which hurts the very economy we are trying to fix.

The financials are not done with the mortgage crisis. Some would like to divert attention from this, but the fact is that we are still in the crisis. And a great number of people will lose their homes. The housing market will have it’s crash, which is long overdue, and credit will be harder to get. All of which is normal.

For too long people have had too much credit without any security to back it on. A full generation of young adults have grown up thinking that this was the norm. We need this correction to get back to reality.

Want lower oil prices? Develop new sources of energy. Not because it’s an ecological thing to do, or because of some nightmare dreamed up based on barely enough information to make an estimate on. We need to do it because it will create jobs that can’t be exported, will lower dependance on oil, and infuse the economy with cash. It also means that the equity structure of the market will change, several blue chips will lose value and new ones will be created. Such is a dynamic market, which we don’t have now.

Gold will strike my target of $125 and oil $1125 this year. And they will both do so far faster than I expected if we continue to weaken the dollar and fix they symptoms and not the problem. Loss is part of an investment, as is long-term gain based on fundementals. To try to prevent one prevents the other.

This will feel bad, and unemployment may hit, gasp, 8%. 30 years ago that was a massive win. And it’s not a bad thing. If we aren’t throwing money at the public because they aren’t as comfortable as they were 5 years ago. If politicians had balls they would say this. Social entitlements should only be for those in need, not thouse that need to want.

The end of the 1st quarter will be another round of write-off for financials. And the market will continue to flounder as they try to stabilize their losses. At least one major financial will fail (actually will be forced to merge because they are too big to fail). And at 11,000 the market will stabilize and slowly rise. Growth will begin at that point at a moderate and unimpressive 1% or 7% in the market.

If gold moves as I expect, and the Government stops wasting money in stimulus plans, then there will be a sale in the commodity and an influx in the market. If wind and solar get a few positive laws there will be a spur in that arena and oil will drop slightly after hitting my target. IF taxes are increased, as was voted on yesterday, then the problem will extend into 2009 3rd quarter.

Patience, calm and paying attention to the underlying fundementals will do investors and homeowners more good than cutting rates and suggesting purchases of new Ipods that people can’t afford to have anyway. Shifting energy plans away from ethanol, which is driving up food prices and thus inflation, is also smart.

What will I do with my $600 from the Government stimulus plan? Leave it in the bank until I have a bigger purchase item I need for my business. I’ve already cleared my debt, and keep minimal revolving credit. My investments are balanced and long-term so the current moves don’t faze me. Unlike the Governments rush to do something – even if they have no idea what to rush and do, I have a plan and that allows me to sit and wait to see what happens.

So now you have my thoughts. I’ve factored in the lower refining levels due to the accident earlier this year. I’ve factored in the lesser supply of gold from South Africa, and the Olympics in China. I’ve looked at the real estate market, and the Dow Jones. So until the Dow hits 11,000 (plus minus 100 points or so – I’m not that good) oil and gold rise further and we enter the 3rd quarter it’s just time to accept the pain. But I’m sure this being an election year all of that will get mucked up by political ambitions.

We shall see.

Labels: China, Crude oil prices, Dow Jones Index, economic forecasts, ethanol, gold spot prices, green energy usage, mortgage crisis, Olympic games, tax increase

Well it would seem that I am wrong and right. Both of which seem to be occurring sooner than I would have ever imagined. And the implications of this is going to have repercussions for quite some time.

With crude oil closing above $100 on Tuesday I am proven right in my expectation of an increase in the price. But I am incorrect for the reasoning and timing. It was my expectation that OPEC would cut production and this would help to fuel further price increases on the New York Mercantile Exchange. The OPEC meeting is on March 5th, and there are still expectations that production will be curtailed. So this may fuel even higher prices.

The cause of this sudden rise was not my presumption of actions in Venezuela and Iran either. It in fact is directly connected to the refinery accident in Texas on Monday. The refinery handled 67,000 barrels of oil a day and as such will have an impact rather quickly in the U.S. This explosion was a tragic accident that could not be expected nor factored.

But in looking at the results from this and the comments over the weekend of Hugo Chavez there are some things we can understand. Chavez, by the way, has backed off his threat to cease sales to the U.S. Obviously the threat was not a major problem for the U.S. as others nations were willing to cover any gap and the total volume from Venezuela is not enough to impact the nation. Cutting sales would impact Venezuela though. In addition I would imagine that Iran was not willing to back their friends in Venezuela on this matter.

According to AAA and the Oil Price Information Service the price for gasoline hit a national average price of $3.032 a gallon. Expectations by the Energy Department target the cost per gallon to exceed the $3.23 that was reached last May in this year. This expectation seems to be a forward indicator of higher crude oil prices, and futures contracts seem to support that theory.

I previously mentioned

“Beyond this scenario the more likely thing to expect is that OPEC will be cutting production levels during the March 5th meeting. Without a dramatic downturn in the U.S. and world economies, in that order of importance, a return to $100 a barrel will likely happen again for a brief period before the summer and then drop back into the mid -90’s. But I believe a surge will occur along with a resurgence of the American economy in the 3rd and 4th quarters. I will say that by the end of 2008 oil breaking $110 is likely.”

Without accounting for the unforeseeable, there has been nothing that has changed except the accelerated increase in crude oil prices and futures contracts. Given that, I continue to stand by my outlook, with one change. I expect that the short-term prices will likely run to about $110 before backing off. My new target, adjusting for this accelerated move in prices, is that by the end of 2008 crude oil will exceed $125 - $130.

Hopefully there will be no more tragedies for the entire year that could accelerate this move higher.

Labels: Crude oil prices, Energy Department, hugo chavez, New York Mercantile Exchange, Oil Price Information Service, OPEC, Venezuela

Crude oil prices have been on a seesaw of volatility, most notably since hitting $100 a barrel in January of this year. Since that time there have been recession fears in America, massive rate cuts by the Federal Reserve, horrendous losses by most financials due to the mortgage sub-prime loans, and drops in the stock markets to near bear levels. That says nothing of the current growing battle between Venezuela and Exxon.

Overall the pressure has been on the downside of pricing, as many of the indicators express a likelihood of reduced demand as industries slow down. Yet not all the pressure is one sided. And the economic outlook is seen as not as bleak as once thought.

"The market has been struggling with whether we are recession-bound or not," John Kilduff, senior vice president for energy at brokerage MF Global in New York said. "That's an indicator [Japan’s economy] that whether or not we are, there's some life out there in the rest of the world and energy demand could hold up."

It’s this factor that has added to the price of crude oil recently, topping $95 a barrel on February 14th. But I think there is an aspect that has yet to be factored into the market. That factor has nothing to do with Federal Reserve Chairman Ben Bernanke’s thoughts the U.S. economy will rebound at the end of the year. It has little to do with the lack of effort of states like Michigan to create a renewable portfolio standard. It has everything to do with Venezuela.

It’s a given that the 90,000 barrels of low quality crude exported by Venezuela to the U.S. is a fraction of what the nation used. The threatened cut of sales to the United States is more likely to have a negative effect on Venezuela than effect America or impact crude prices significantly. But it’s the ally of Venezuela, or more accurately the ally of Hugo Chavez that matters. That ally would be Iran.

Iran is a major oil exporter, and no friend of America. In recent months there have been several conversations of mutual support between Iran and Venezuela, and condemnation of the U.S. It is this mutual anti-American sentiment that could drive up prices beyond an OPEC reduction in supply might create.

If the current court actions continue to favor Exxon over Petroleos de Venezuela, and negotiations fail with ConocoPhillips causing them to follow in Exxon’s direction it could start a landslide against that nation. In the face of that kind of pressure, and the refusal to sell oil to America, Iran may join with Venezuela in a stance against America. This combination of political action and national leadership prejudices is an unknown that I have yet to see any analyst or blogger mention. It’s probable that the reason for that is the unlikely nature of it coming to pass. But unlikely is not improbable.

Beyond this scenario the more likely thing to expect is that OPEC will be cutting production levels during the March 5th meeting. Without a dramatic downturn in the U.S. and world economies, in that order of importance, a return to $100 a barrel will likely happen again for a brief period before the summer and then drop back into the mid -90’s. But I believe a surge will occur along with a resurgence of the American economy in the 3rd and 4th quarters. I will say that by the end of 2008 oil breaking $110 is likely.

Now let’s see if this comes to pass.

Labels: Ben Bernanke, ConocoPhillips, Crude oil prices, Exxon, Federal Reserve, hugo chavez, Iran, John Kilduff, MF Global, OPEC, Petroleos de Venezuela, Venezuela