Sunday, December 30, 2007


I watched the Patriots game last night with great angst. Being a Colts fan, I naturally was hoping for them to get sent back to the coast stinging and crying about what would have been a perfect season. In retrospect I know see that if they would have lost, it probably would have been an excuse to raise gas prices above the current headache of over $3 per gallon. There seems to be no rhyme or reason to the American economy at this point other than to say that it is driven completely by greed and ignorance. Bare with me on this one....I do have a point. I listen to random people gripe daily that oil companies and OPEC are to blame for the current state of the economy and more directly, oil. I, however, see things in a different light. Follow this scenario. A well dressed, fairly affluent man sits in an airport terminal waiting for a connecting flight back to New York. The TVs in the common area blare out the latest news from CNN involving the assassination of someone somewhere...pick your favorite third world country at this point, oil producing or not...followed up by a report that the DOW Industrial is begging to quiver due to investor angst. Joe Millionaire calmly retrieves his Blackberry from his pocket, and with a few quick strokes manages to dump half his industrial portfolio and looks for something to buy to recoup any losses. Hmmmm.....oil seems to be doing OK...let's buy future shares....voila....the cascade begins. For those of you who don't know, futures involving long(the bet that a stock will exceed it's targeted future price) and short(betting that a stock will not meet a target price) are the single largest problem with oil and fuel prices today. Let's go back to our friend at the airport. Let's say that he has purchased a modest amount...say...10.000 shares of oil futures on the long at $98 per barrel for the next quarter. This means that he is betting that oil will exceed $98 by the end of the next quarter, and if it does he is a rich man. He will be able to sell stocks @ the target prices without having to actually buy them up front. It's like buying on credit and is almost a win win situation for someone with the initial cash flow and knowledge of he cycle. No multiply this man by the millions of investors that hit the market daily. By their sheer numbers alone, they can drive the price of oil into the stratosphere without having to increase the actual demand for oil. Oil can't help but hit it's target price each quarter due to the fact the there are so many outstanding orders, the oil companies couldn't possibly hope to fill them all. It's a windfall for everyone involved but the end consumer. I see no end in the current trend barring intervention by the FED/SEC to curb the ability of the so called "day traders" to drive the market without having to first pony up.

Friday, December 28, 2007

Film at eleven...

This is just a placeholder...until my mind gets wrapped around the idea of writing my thoughts on a daily basis for other people to pic apart and critique.