The Speculative Grade Blogger

Oil as an investment

2008-12-30T22:17:00.002-05:00

Yesterday I bought oil as an investment. Or at the very least it will act as a hedge against increases in energy costs. I plan build a position in oil in small increments over time as the opportunity presents itself.

I think this is a 12-18 month trade. There are a couple of different reasons for this.

First, the price of oil is depressed in the short term b/c of the global economic slowdown. Remember, the price of energy reacts quickly to changes in the supply/demand relationships b/c of storage costs. Recently, supplies have been building up so the price has been declining. I dont think this can last given OPEC is trying to cut back production, economic recovery expectations, and potential for Middle East conflict.

Second, the price of oil is also related to the value of the dollar. The dollar has strenghtened recently b/c its perceived to be somewhat of a safe haven amongst its global currency counterparts. When this trend reverses, oil prices should head higher.

At current prices of $40/bbl, I dont need oil to head much higher than the high $40s before I start to get decent returns. A price of $50 w/in 12 months would be a 25% annual return.

Not bad.

On the flip side, there is potential for prices to head lower from here. If that happens, I would look for another bottom similar to the one we are in now and buy a little more again.

Goldman reports earnings tomorrow morning.

2008-12-15T21:45:00.003-05:00

Could it be that even God will be watching CNBC tomorrow morning at 830am?

That's when Goldman Sachs will report its first ever quarterly loss in its 80+ yr history as an investment bank.

A fitting end to the latest go-go Wall Street era.

The market has a consensus earnings number in mind. CNBC reports on it here.

Even though earnings are a lagging indicator, most of the market will be looking to see how bad the earnings number is tomorrow morning.

It will be viewed as a barometer for how bad things really got in the fall of this year and perhaps even as a signal of how bad things are going to get early in 2009.

Stay tuned.

OJ Simpson sentenced 15 yrs for armed robbery conviction... and murder acquittal?

2008-12-06T15:16:00.005-05:00

You decide.

Did OJ's murder acquittal 15 yrs ago and the fact that everyone thinks he did it have anything to do w this conviction and sentencing?

I say most definitely. How could it not have had an impact?

Watching OJ plead for leniency before the sentencing must be satisfying for some.

Sometimes I think the justice system is so bizarre.

Barack Obama provides some details on economic recovery plan in weekly webcast

2008-12-06T14:35:00.008-05:00

Good news! Barack Obama is effectively the President already.

2008-12-06T14:20:00.006-05:00

That's right. You dont have to wait till Jan 20, 2009 as I previously thought. He is pretty much running the show already.

Remember Barack's first press conference where he said "we only have one president at a time in this country"? He was right. It's him.

After that first press conference he went to visit W in the White House and his tone dramatically changed after that meeting. Does anyone want to bet that W in so many words acknowledged that Barack Obama should be more involved going forward?

He knows the people want him to take charge and he is delivering. Listen to him speak. When was the last time we had a President who was intelligent enough to think about a problem from many different perspectives?

I will give you a hint... think Bubba. Yes it was Bubba despite all his shortcomings.

I would really like to say it was a Republican president b/c the economist in me says I am more closely aligned w the conservatives b/c its the GOP that typically supports free market ideologies.

But it would be a lie if I did that.

What do you think of Ed Rendell's comments?

2008-12-05T00:12:00.004-05:00

Ben Bernanke and the rest of the feds might as well drop money from airplanes... that's the only thing left to do at this point

2008-12-03T22:44:00.005-05:00

These CNBC ads are driving me nuts...

2008-12-02T21:42:00.003-05:00

I Am CNBC: Charles Gasparino from Broadcasting & Cable on Vimeo.

If you watch CNBC like I do, you probably have noticed that they are running these new ads where they highlight a specific personality that appears on the channel.

This particular ad focuses on Charlie Gasparino, the on-air editor at CNBC. At one point during the piece he says he would be "honored to die on the job" or something to that effect. Are you kidding me???? The last thing most people want to do is die on the job. I can probably think of a thousand better ways to go.

These ads are pretty bad and it seems the most of the finance industry shares the sentiment. It's bad enough we have to see some of these people all day long as they spew their sometimes ludicrous opinions, but then we have to see them again during the commercial break.

Please.......

How should South Asians think about charity?

2008-12-02T21:34:00.003-05:00

There was an article written on the Freakonomics website several days ago about how South Asians should approch charity.

The article is here.

This got me thinking about the topic which is related to an earlier post on this blog about giving back to society. The article I mention above is about how South Asians are more well-to-do than average Americans but still have not found their voice when it comes to philanthropy and mobilized themselves to have more voice in society and government.

I find this to be one of the critical challenges for South Asians over the next 25 yrs. We are a group of people in the US who are highly educated and have more wealth than most Americans, yet we have not found a way to mobilize ourselves and speak w one voice.

Will we ever get there? How can we do this? Should we try to do this?

Automaker CEOs are starting to get the picture

2008-12-02T21:04:00.005-05:00

Earlier today, the CEOs of the big 3 US automakers made their way to D.C.

This is interesting b/c last time they actually drove in their cars this time. The last time they went to Congress to beg for money before the Thanksgiving break they flew in their corporate jets.

Congress blasted them for this and asked them if they would drive the next time they came. Upon returning to Detroit, they put the corporate jets up for sale. (I dont know if they put them up on ebay like Gov Palin.)

They also seem ready to accept virtually no salary if they end up using gov't money for a bailout. This is a good first step for them.

Seems like they will get the money they want.

Thankfully, this time around it will come w strings attached.

Google Reader will change the way you get information from the internet

2008-12-01T20:55:00.003-05:00

So, I will apologize in advance if this sounds like a bit of a commercial but I have to show you something that is changing the way I use the internet.

It's called Google Reader and you can find it here.

It might take a little getting used to but I can assure it is well worth it. Google Reader is a newsreader that allows you stay up to date w all the websites that you go to for information.

You know, we all check the same sites every day for news, sports, blogs, etc. Well, you can use this web based software instead of loading all those sites every day. And it lets you know automatically when a site you subscribe to has new updates.

And then you can automatically subscribe to this blog!

Here's a comic strip that pokes fun at the investment banking business

2008-12-01T20:52:00.003-05:00

Here is a link to a comic strip about investment banking and finance culture if you are interested.

It pokes fun at a lot of things that happen in the finance biz and is very funny given everything that's going on the world right now.

www.alexcartoon.com

Quote that sums up what's happening in pro sports today

2008-12-01T20:30:00.005-05:00

"The difference between the old ballplayer and the new ballplayer is the jersey. The old ballplayer cares about the name on the front. The new ballplayer cares about the name on the back."

- Steve Garvey

U.S. Recession officially started in December 2007

2008-12-01T20:22:00.005-05:00

The National Bureau of Economic Research (NBER) claims the current recession in the US officially started in December 2007.

You can read the article here.

This is interesting partially b/c the NBER did not follow the typical definition of recession this time around. Typically, a recession is declared when we have had at least two consecutive quarters of negative GDP growth. While this is not the official definition it certainly is one that I and many other people thought to be a widely accepted one.

This time around dating the recession back to 12/2007 really has more to do w the peak in employment during the last bull market which occurred back in late 2007.

It is also interesting b/c it makes the recession 1 yr old already. Psychologically that is a long time. And it may well be late 2009 before the recession is declared over.

There is a strong possibility this could be a 2 yr recession which is long by post-WW2 standards.

Another pro athlete gets into trouble. Why can't some professional athletes stay out of trouble?

2008-11-30T15:11:00.002-05:00

Can someone help me out w this one? You can read the article about Plaxico Burress here.

You won the Superbowl last year. You make millions of dollars. Why cant you just stay out of trouble? Is this too much to ask?

In all fairness, Plaxico Burress did say he was accidentally shot in the leg. What I wonder is how you exactly get into a situation that would even allow you to have a remote probability of actually getting shot.

For all the money and talent professional athletes have, some of them act so foolish. You would think they would be smart enough to do whatever they needed to do to stay out of trouble.

Then you hear of another pro athelete getting into trouble.

Movie recommendation - Watch The Transporter movies for some good fight scenes!

2008-11-30T14:45:00.006-05:00

So last week someone recommended we watch The Transporter and Transporter 2. I didnt really know Transporter 3 was going to be released in theaters this week. For some reason I had never seen the first two movies.

You can check out the basic storyline of these movies at the Yahoo! Movies website.

Let me just say that I consider myself to be fairly critical as a movie watcher. The acting in these movies leaves something to be desired. But the action anf fight scenes make up for it! I am definitely looking forward to seeing Transporter 3.

Jason Statham who is the lead in these movies and has also been in other movies recently like The Bank Job.

When is the world going to take the terrorist threat seriously? When are we going to stop this?

2008-11-29T16:04:00.003-05:00

American consumerism gone MAD! Wal-Mart worker trampled to death on Black Friday.

2008-11-29T15:16:00.010-05:00

This is horrible. It's makes me sad to thnk we live in a society where something like this can happen.

What does it say about me if...

2008-11-29T15:07:00.007-05:00

I get more calls and emails from friends and family about Black Friday deals during the week of Thanksgiving than at any other time during the year?

It seems I have developed a nice little reputation as someone who knows where all the good deals are on Black Friday.

Friends and family who I rarely talk to during the year called or emailed this week asking where the Black Friday deals were. All this stop and made me think about what other people think of me.

Odd. Perhaps not. Interesting? For sure.

When do people call or get in touch w you the most?

These guys at Princeton threw a keg party but didnt tell the Freshman they were drinking O'Douls!

2008-11-29T14:45:00.007-05:00

When is the world going to crack down on terrorists training and hiding out in Pakistan?

2008-11-29T14:26:00.007-05:00

For the past two days, I have been watching the news about out the terrorist attacks that happened in Mumbai this week. One thing is for sure - I am not surprised it happened.

The fact is that terrorist attacks have been going on in India for years now. And they have gotten more and more deadly over the past several years. You can find the history of terrorist attacks in India all over the internet. India is a natural target b/c it is the largest democracy in the world and is developing closer ties w the west.

Another dirty little secret in all of this is that many of the world's terrorists and their leaders get their training and/or hideout in Pakistan. Yet no one is really willing to acknowledge this fully. Why?

Because if you acknowledge something, then you also have to take action to stop it. That is a daunting proposition for the rest of the nations of the world.

I never really understood why India's relationship w the west was so icy for years. It's the largest democratic, capitalistic country in the world. I also never really understood why the US had a better relationship w Pakistan than it did w India.

Maybe this will be the event that finally forces the world to acknowledge the dirty little secret that some of us have know for quite some time now. International terrorists are training and hiding out in Pakistan and the Pakistani government is not dedicating enough resources to stop their activities.

The rest of the world may end up doing it for them.

Gas is $1.78/gal in my neighborhood. What's the price where you live?

2008-11-29T13:55:00.003-05:00

Dont get me wrong, I like low gas prices just like the next guy.

But we shouldnt let the current low price of oil fool us into not doing anything to increase our fuel efficiency over the long-term. Otherwise, we havent learned anything.

And if as a society we lack the conviction to do this on our own as individuals, then I would go so far as to say the government should heavily tax gasoline and use the proceeds immediately to develop alternative fuel technologies.

If we dont do this, OPEC will do it for us by cutting back supply and driving the price of oil higher. The Saudis have openly stated they would like to see the long term price of oil much higher than it is today.

Would you rather spend more money on gasoline and keep the money here in the US or would you rather send the money over the middle east?

It's our choice.

Market Perspective 11/25/2008

2008-11-26T22:41:00.005-05:00

Here is my take on the markets this week -

GDP number for Q3 2008 was revised down to -0.5% from 0.3%. Not a big deal in the grand scheme of things.
Most other data revealing the state of the economy right now (i.e. 4Q 2008) suggest SERIOUS negative economic growth. Think something like -5% annualized. The last time we saw data this bad was 1980-1981.
Unemployment data deteriorating at an accelerated pace. Peak unemployment very likely to be 8.5-9% in the first half of 2009. This number is moving fast. Keep an eye on it. We are in a heap of problems if the peak number moves past 10%.
Most economists now saying 2009 is lost which means it will be 2010 before the economy even thinks about getting better.
Watch out for what happens w the automakers. They will likely get the $25bn they need from Congress, but not w out strings attached. We should all hope they get this money right now if for no other reason than not giving them the money at this very moment in time will literally send the economy into a death spiral. This is not what we need right now. Long term, we should focus on the problem of the automakers as a country but we cant just let them go cold turkey. We have to downsize the automakers in an orderly fashion over the course of several years.
One big thing the market was looking for was for Obama to step up to the plate and take more control over the economic situation. Previously he said he wasnt the President until Jan 20. The market didnt like that. We want him to announce his economic team which he did this week and last. Since W is pretty much a lame duck at this point, everyone was loking to Obama to be more vocal about his intentions on Jan 20. Obama got the message and has been more active about communicating his intentions on how to deal w this economic crisis. Market rallied on this news.

If you have been watching the stock market recently, you know the market has been forming something of a bottom at recent levels. This bottom is a very delicate one in my opinion. Any news that the deterioration is accelerating is going to be a problem for the markets to handle. Automakers need to get their money w strings attached.

Cross your fingers...

Parents Need To Find Ways To Teach Their Kids How To Contribute To Society

2008-11-26T22:33:00.003-05:00

All of the things going on in the world recently have got me thinking a lot about our children and their future. The election, economic crisis, the holidays...

We have got to find a way to leave this world a better place for them.

One of the biggest ways we can do that is by teaching them how to contribute to society by helping those who are less fortunate than we are. I find this to be lacking in a lot of people these days and I am so afraid I will fail as a parent to teach instill this quality in my kids.

That's why this holiday season I am going to try and emphasize helping those less fortunate than us just as much as I think about spending time w my own family and sharing gifts, etc.

Maybe I am getting wiser as I get older.

I Like American Idol Too But This is Ridiculous

2008-11-26T22:26:00.005-05:00

You might understand this video if you are an American Idol fan. You will probably understand it better if you are female which I am not. You have to turn up the volume to hear the beginning.

These kids are crazy fans. I like American Idol too, but you have got to be kidding me...