Crude and Gas Prices, Global Economic Change

Its funny what travel will do for you, it may even make you cynical. As i travel all over the USA i see a huge fluctuation in the price of gas at the pump.... in many cases in excess of a dollar. Los Angeles always seems to trump at the pumps, even beating Hawaii which to my knowledge has no indigenous supply and therefore must be importing its gas from overseas.

What does all this lead me to speculate? What does my cynicism indicate.....

I think that the oil and gas companies know that with more efficient cars, alternative fuels and other such measures demand and consumption will decline, therefore they are gouging profits now to ensure their future.... The Gulf Nations know that their liquid gold is disappearing and that they have to make everything they can, capitalizing on a weak dollar and decoupling to further enhance their wealth.

Meanwhile the US governments continued investment in foreign policy that has huge financial burden and limited recompense further enhance cost and distention within the oil producing world. Expect that heating gas/oil/ electric etc rise significantly next winter creating further pressure on the already lackluster housing market as well as a sweltering summer and increased air conditioning hurting this summer in the southern states. (This will also become a major factor affecting the commercial real estate markets and causing more of a downturn, along with added market pressure.)

Ultimately how can the US deny we are entering a recession or more likely a depression, all the smart money is heading to China which now benefits from a burgeoning internal market. Look for the Yuan to decouple from the dollar after the Olympics further shaking the global market place, stocks and commodity prices.


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Roll the Dice and Play the Financial Market Lottery

Working and investing in the financial markets is for the majority the same as visiting a casino, ill thought out investments, lack of knowledge/ understanding and of course the untold riches of success and high rates of return draw the more aggressive individuals into a high risk game of guess and second guess. The general parameters are the house always wins, much like a casino, and by this we are talking major financial institutions and experienced players who are hedging and using complex financial instruments to allay their risk and to pass it to the investor.

The secret is to work on a long term ride in lower return funds - growth and income is really the place to look and avoid individual stock picks in favour of a mutual fund/ etf to spread and mitigate your risk. Remember that market downturns are buying opportunities more than anything else..... Just maybe not till the end of this year or early next!

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Troubled Market - Obvious Change Required, But How to Achieve It

Performance Related Pay has been the primary method of compensation for high level employees for the last 20+ years....Anyone with the ability to affect the volume of sales or profitability from sales should be directly compensated from this money, thus motivating them to bring in more business, cut costs and increase profit. It is also one of the primary components of the SubPrime Crisis and other financial mishaps.... With huge bonuses available at the end of each year and one good bonus being enough to pay for a house, set you up for life or start your own fund/ company employees are willing to take huge risk to ensure their bonus this year is amazing with little or no care for two to three years distant....

With this factor in mind, large financial institutions have phenomenal profit and growth so long as the market has the capacity to absorb it, however in economic downturn many of these short term maneuvers become illiquid and are unsaleable. Thus the bank has to take the brunt of the loss.

When i use the term absorb, I am of course taking about off balance sheet, international companies. This is something that Goldman Sacks has excelled at and continues to excel at by hiring the brightest and the best. It is only a matter of time before which they have to admit openly to some of the losses they have incurred and to some of the downsides of their investments that they can no longer hide. The major factor is that no one wants a "holey" ($0) bonus so they will continue to find ways to hide losses and to look like the shining hero's of the sub prime crisis. Remember they were no less greedy and no smarter than all the other institutions they just hide it better! Thus i factor a major "scandal" within the next 8-12 months which will significantly affect their share price.

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