Continue reading ETF Funds: Hedge your home heating bills with UNG

ETF Funds: Hedge your home heating bills with UNG originally appeared on BloggingStocks on Thu, 29 Jan 2009 18:00:00 EST. Please see our terms for use of feeds.

This morning my wife asked me this question and I had no idea how to answer it. But it's true that oil is down -- it trades at $34.39 a barrel; while gasoline prices have been rising between 10 and 20 cents a gallon from the low. I paid $1.66 a gallon for mid-grade three weeks ago and $1.79 for mid-grade last week. So what's the answer? Less supply because refiners shut down for regular maintenance during this time of year.

While this may not be true throughout the country, it appears to be so in California. In late December, The MercuryNews predicted that gasoline prices would rise 10 to 20 cents a gallon. Why? California refiners including Exxon-Mobil (NYSE: XOM) and Chevron (NYSE: CVX) cut back on production for their usual maintenance needs in January. Moreover, a BP plc (NYSE: BP) plant in Carson, CA , had mechanical problems that affected production.

Overall this means lower supply with demand remaining relatively constant. California's Energy Commission reports that production of CA's gas blend fell 11% in January from the previous month. In the short run, prices should fall back as these refineries go back to normal production. But experts predict that gasoline prices nationwide could hit $2.50 a gallon nationally this summer.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College. Portfolio recently published his eighth book, You Can't Order Change: Lessons From Jim McNerney's Turnaround at Boeing. He has no financial interest in the securities mentioned. He has no financial interest in the securities mentioned.

If oil is down, why is gasoline up? originally appeared on BloggingStocks on Tue, 20 Jan 2009 12:50:00 EST. Please see our terms for use of feeds.

One of the great things about a global financial collapse is that economic activity slows down so much that people use less oil. And one of the more interesting aspects of this collapse is that despite the terrible problems we face in the U.S., investors are flocking to the dollar as a symbol of permanence in a turbulent world. Since oil is traded in dollars, the combination of a stronger dollar and weaker demand leads to a lower price.

For example, today oil went as low as $86.36 -- which is 41% below its July peak of $147. Meanwhile, the dollar hit a 13-month high of $1.36 to the Euro -- that's 15% stronger than the $1.60 it traded at this summer. That may be because the U.S. passed its $810 billion bailout plan and Europe has not yet figured out what it will do to deal with its financial crisis. Not to worry, oil is still 260% higher than the $24 it traded at in January 2001 and the dollar has lost 48% of its value of $0.92 to the Euro at which it traded back then.

Where do we go from here? That depends on two variables: how much oil-producing nations cut back on production and how the dollar performs relative to other currencies as this global financial crisis unfolds. If oil-producing nations cut back on production, prices will rise as long as the supply contraction matches the decline in demand. And as long as the world perceives that the U.S. is the world's financial safe haven -- the dollar could strengthen. And that would push oil prices lower.

In a nutshell, oil prices will keep dropping unless oil producing nations drastically slash production and the dollar plunges.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

Oil below $90 as dollar strengthens originally appeared on BloggingStocks on Mon, 06 Oct 2008 10:28:00 EST. Please see our terms for use of feeds.

Even with some modest recovery in airline stocks, it may be too early to celebrate. The worst may not be over for the industry.

The International Air Transport Association says that global losses for airlines could top $6.1 billion this year. The Wall Street Journal quotes ATA Chief Executive and Managing Director Giovanni Bisignani as saying, "We are bracing for more situations of airlines collapsing" amid higher fuel prices and lower revenue.

The slowdown is apparently moving to Asia, a major destination for many large US and EU airlines.

United (NASDAQ: UAUA) is a good example of a US airline that many thought would be on the rebound. New fear of rising oil prices has spoiled that a bit. After falling from a 52-week high of $51.60, shares crashed to $2.80. They have recently made a minor recovery to $12.40. But, in the last two days, UAUA shares have been off sharply.

Oil is still just below $120. Even at that level, down from $143, airlines face huge increases in fuel prices over last year. A modest disruption in oil supply could send prices back up again.

The market sees US airline stocks as having potential for big returns. But, with the price of oil making a potential bottom, the carriers are still in too much trouble to have a real recovery. Buying shares in the companies still offers more risk than reward. The industry may still have operators that have valuations heading toward zero.

Douglas A. McIntyre is an editor at 247wallst.com.

Will $6 billion in losses sink an airline or two? originally appeared on BloggingStocks on Thu, 21 Aug 2008 10:00:00 EST. Please see our terms for use of feeds.

High gasoline prices are putting the squeeze on companies and their workers. People are leaving their jobs due to the high commuting costs. The New York Times reports that a resume service received "14 calls last week and 9 of those named high gas prices as their No. 1 reason for leaving their job."

And by my count, the Times presents seven ways that companies are changing to relieve the pressure:

• Encourage more telecommuting. The Times describes how "Citigate Cunningham, a public relations company, now encourages workers to stay home whenever possible, providing laptop computers and BlackBerrys to enable telecommuting, and reimbursing them $40 a month for high-speed Internet connections in their homes."
• Give employees money to pay for gas. Since June, OperationsInc., a human resource consulting firm, gave employees up to $100 a month on an American Express (NYSE: AXP) card "to offset rising gas prices."
• Rent offices closer to workers' homes. Microsoft Corp. (NASDAQ: MSFT) recently "leased three large office complexes far from its headquarters" to cut 7,000 employees' commutes.

Continue reading Seven ways that companies cope with high gas prices

Seven ways that companies cope with high gas prices originally appeared on BloggingStocks on Thu, 07 Aug 2008 10:40:00 EST. Please see our terms for use of feeds.

Continue reading Analysts say $4 per gallon may be a gasoline use game-changer

Analysts say $4 per gallon may be a gasoline use game-changer originally appeared on BloggingStocks on Thu, 26 Jun 2008 09:00:00 EST. Please see our terms for use of feeds.

The average price of gas finally crossed $4 last week, perhaps on its way to $5.

According to The Wall Street Journal, "The record nationwide average for regular-gasoline prices, announced by auto club AAA, follows Friday's near-$11 surge in oil prices to a record $138.54 a barrel."

While it makes a good headline, it is really no more important than when gas went above $3.95 or if and when it moves above $.4.05. What is important is that, at the current level, gas on its own could break the back of the consumer, and of many businesses.

It is not unusual for drivers to use 20 gallons of gas a week. For that consumer, the difference between $2 gas and $4 gas is $2,100 a year. A family making $40,000 is probably keeping $30,000 after taxes. So, 7% or 8% of their net income now goes to gasoline. That does not leave much for the rising cost of food and a mortgage.

The news is obviously just as bad for industries like farming and the airlines.

If investors want to see where the economy and markets are going, watch gas prices. They are probably a better proxy for how bad things are for the consumer than any other single measure. Gas at $5 would be a catastrophe.

Douglas A. McIntyre is an editor at 247wallst.com and author of the Ten Stocks Under $10 letter.

As gas crosses $4, the economy sweats originally appeared on BloggingStocks on Mon, 09 Jun 2008 09:15:00 EST. Please see our terms for use of feeds.

Crude at $130 a barrel is bad enough. Who needs more negative news about oil prices? It appears that additional data supporting further increases keeps coming, no matter what.

Recent research shows that oil supply out of countries which are net exporters of oil is not keeping up with demand from consuming nations. According to The Wall Street Journal, "Fresh data from the U.S. Department of Energy show the amount of petroleum products shipped by the world's top oil exporters fell 2.5% last year, despite a 57% increase in prices." If those nations could have shipped more crude, wouldn't they have done so to make more money?

There is a great deal of data which shows that oil-producing nations are keeping more of their product to build their own infrastructure and fuel their own cars and trucks.

But, the answer to lower shipments may be more sinister than that. Oil-producing countries might make more money releasing extra crude this year, but that could push prices down. If they are more liberal in sending oil abroad over the next several years, they might get more cash from volume but less from higher prices. Oil supplies may be being "managed" by OPEC and its friends to keep prices high for the next decade.

There is a conspiracy theory for everything else. Why not for oil supply?

Douglas A. McIntyre is an editor at 247wallst.com and author of the Ten Stocks Under $10 newsletter.

The news on oil gets worse originally appeared on BloggingStocks on Thu, 29 May 2008 08:26:00 EST. Please see our terms for use of feeds.

Like, his paymasters, the oil companies -- who contributed $2.7 million to his 2004 campaign -- George W. Bush is feeling sorry for himself. Perhaps his record low poll ratings are hurting his feelings. He went to Saudi Arabia and asked it to increase production. He went to the Middle East and asked them to make peace -- it's a nice sentiment but will results follow? But that's not why Bush is whining.

BusinessWeek reports that Bush's complaint is that he thinks General Electric Company's (NYSE: GE) NBC News was unfair in the way it edited an interview. In the Israeli parliament, Bush gave a speech which none-too subtly implied that Barack Obama was like Nazi appeaser, Neville Chamberlain, because Obama has said he would meet with Iranian leaders. Bush thought he was being clever in his non-denial denial. Now he is complaining that NBC is being "deceitful."

That's rich coming from the person who got the U.S. into a war with Iraq based on false claims of Weapons of Mass Destruction (WMD) and ties to Al Qaeda. Is it the "Mission Accomplished" Bush or the "Heck-of-a-job-Brownie" Bush who's complaining about NBC News's "deceit?" Meanwhile -- as I posted here, here and here -- the oil companies have been whining because their earnings are down -- the price of oil has doubled and they have only been able to increase wholesale prices by 39%. Boo hoo!

So as you stand at the pump filling up your tank with $4 a gallon -- a surprise to Bush -- shed a tear for Bush and those poor, suffering oil companies.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He owns GE shares.

Let's shed a tear for Bush and the oil companies originally appeared on BloggingStocks on Tue, 20 May 2008 11:22:00 EST. Please see our terms for use of feeds.

One oft-repeated phrase from Washington is that there is "no magic wand" that can lower oil prices. This has proven to be comedic gold for some. But for people who find themselves paying nearly $4 a gallon to fill up their tanks, the joke is not so funny. After all, with an "oilman" in the White House, it should come as no shock that the price of a barrel of the gooey stuff has risen 5-fold since January 2001 -- hitting a record $126 today.

I noticed that every time the Fed cut interest rates, the dollar dropped in value and the price of oil rose. As I posted, this dynamic is as sure of a bet as you can get in the real world. That's why traders are shorting the dollar and going long oil. And they're betting enough on that trade to drive up the price of oil consistently. As I discussed last night on New England Cable News (NECN), the European Union decided yesterday to keep its interest rate at 4% to fight inflation. Ours is a mere 2% so investors are selling dollars and buying Euros.

This brings us to how Washington can cut gas prices fast. All it has to do is to raise interest rates. This little move requires no Congressional approval and the oval office occupant doesn't have to sign a bill. If our Fed got serious about fighting the rampant inflation it has unleashed, it would raise the Fed funds rate, the dollar would strengthen, the price of oil would drop, and you would pay less at the pump. It's as simple as that.

Continue reading How Washington can cut gas prices fast -- and why it won't

How Washington can cut gas prices fast -- and why it won't originally appeared on BloggingStocks on Fri, 09 May 2008 11:27:00 EST. Please see our terms for use of feeds.

Last Friday, April 18, Precision Drilling Services TR (NYSE: PDS), the Canadian Trust, announced that the Board of Trustees has approved a cash distribution for the month of April 2008 of $0.13 per trust unit of Precision. The distribution will be payable on May 15, 2008 to unit holders of record on April 30, 2008.

The current dividend yield of 5.8% remains very generous and far above most other stocks in the sector. After some of my high dividend stock recommendations either under performed or simply cut their distribution, it is reassuring to see that PDS not only is maintaining its dividend, but in this particular case continues to pay out monthly, allowing for better compounding of the yield.

The stock closed today at $27.15, up 75.5% from $15.47 when I recommended the stock three months ago. If you got into the stock back then you would still be receiving over a 10% yield. Last year I had several high flyers but not all of them stayed up so I am watching Precision closely for signs of weakness or changes in the business.

Continue reading Chasing Value: PDS up 75% in Q1, announces distribution

Chasing Value: PDS up 75% in Q1, announces distribution originally appeared on BloggingStocks on Mon, 21 Apr 2008 17:01:00 EST. Please see our terms for use of feeds.

Imagine a large recession in which one of the key energy components almost doubles in price. The tab for natural gas is up by almost double since last summer. That is the same natural gas which most people use to heat their homes. Being cold is not a lot of fun.

According to The Wall Street Journal, "Prices in the U.S. have risen 93% since late August as power-hungry nations like South Korea and Japan compete in a global natural-gas market."

Who says inflation is not a major threat to the US economy? Add to the natural gas spike the rising cost of oil which has pushed gasoline to all-time highs. Add to that increasing food prices due to the bump up in the price of grains such as wheat and corn. Those commodities are being used to product the alternate energy source ethanol.

The picture complicates the job that the Fed and Treasury have to do. Lowering interest rates often increases the ability of businesses and consumers to spend. That, in turn, pushes inflation higher. Not lowering rates could exacerbate the credit crisis and lead to more home and credit card defaults.

There is one silver lining to the cloud. Banks are not passing lower rates on to customers. They are hording the cash that they get from the Fed. It is an ugly reality, but consumers and small businesses do not have access to the capital which they would need to start spending money again.

None of that solves the natural gas problem per se, but it could mean that people will cut back a bit on how warm they keep their homes. That, at least, would be a start.

Douglas A. McIntyre is an editor at 247wallst.com.

Natural gas prices take huge spike originally appeared on BloggingStocks on Fri, 18 Apr 2008 09:30:00 EST. Please see our terms for use of feeds.

The good news keeps on coming. The government now expects oil prices to stay above $101 a barrel for the balance of the year. That means that many Americans will be deciding between driving and the costs of basic daily necessities.

U.S. Energy Information Administration "had predicted $87-a-barrel oil in January," according to The Wall Street Journal. So, the agency has revised its target up 16% in a little over three months.

The biggest question from the report is whether Americans will drive less and keep oil from rising further? The answer may be that it does not matter.

So much of the demand for the world's oil comes from emerging markets such as China that a slight drop in US consumption is almost certain to be taken up somewhere else. Refinery capacity is not growing, so the supply of gas and diesel is not likely to improve. And, new, large oil fields are not coming on line at the rate that they were twenty years ago.

The new estimate on the price of oil may actually be conservative. Watch for it to be revised up again in June. The global demand for crude is that great.

Douglas A. McIntyre is an editor at 247wallst.com.

Oil above $100 for the year originally appeared on BloggingStocks on Wed, 09 Apr 2008 09:20:00 EST. Please see our terms for use of feeds.

December CPI rises 0.3%, but core rises 0.2%, in-line with estimate originally appeared on BloggingStocks on Wed, 16 Jan 2008 09:22:00 EST. Please see our terms for use of feeds.

Continue reading Bush pleads his case to OPEC for greater output, issues warning to Iran

Bush pleads his case to OPEC for greater output, issues warning to Iran originally appeared on BloggingStocks on Tue, 15 Jan 2008 09:17:00 EST. Please see our terms for use of feeds.

To me, the most interesting part of this forecast is that an executive in the industry has no idea where the price will go. As the Times suggests, this is because the price is determined by traders and hedge funds. And these market participants view U.S. equities, housing, credit and currency markets as shaky. By contrast, they see oil and other commodities as a safe haven.

If the Times is correct, then the price of oil will be determined by the direction of U.S. equities, housing, and currency and whether these traders and hedge funds continue to see oil as a store of value. If you think that housing prices will rise in 2009; that the U.S. economy is in for robust growth and a balancing budget in 2009; and that peace will break out in the Middle East then those traders and hedge funds are likely to sell oil and buy dollars -- dropping the price to Richels' $55.

Otherwise, $150 here we come.

Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Devon securities.

Is oil headed to $150 or $55? originally appeared on BloggingStocks on Fri, 04 Jan 2008 12:41:00 EST. Please see our terms for use of feeds.

George W. Bush has weakened America's economic and political standing while strengthening the hand of our enemies. As Iowans caucus today, it remains to be seen whether a leader will emerge this year who can reverse the forces Bush set in motion before America loses its leadership position in the world.

What forces did Bush set in motion? Bush created an enormous federal budget deficit through his $1.6 trillion tax cut. He increased government borrowing to a record $9.1 trillion. His wars in Afghanistan and Iraq have contributed to global instability which has helped drive the price of oil up four-fold from $24 a barrel to nearly $100. The dollar has lost 60% of its value -- for example, the Euro has climbed from 92 cents to to $1.47. And his drive to increase home ownership -- supported by subprime mortgage lenders like Ameriquest -- has contributed to tens of billions of write-downs by banks that bought securities backed by those liar loans.

This is not the first time global leadership has changed hands in world history. According to Niall Ferguson, in the 1870s, the Ottoman empire lost its lead in the world as its over-extended empire sought to cope with an external debt crisis by selling off revenue streams to foreign investors. Then, the Ottoman empire sold off its shares of the Suez Canal as well as its tax revenues to pay off the debts it incurred to finance the Crimean War, railway and canal construction and conspicuous consumption. Back then the beneficiaries of those cheap asset sales were western Europeans.

Continue reading Can Iowa caucuses help reverse the Bush legacy?

Can Iowa caucuses help reverse the Bush legacy? originally appeared on BloggingStocks on Thu, 03 Jan 2008 14:22:00 EST. Please see our terms for use of feeds.

Oil has made several runs at $100, but usually it retreats fairly quickly. Not this time. According to The New York Times," oil held firm above $96 a barrel on Monday, heading for its biggest annual gain this decade as growing geopolitical concerns and dwindling consumer nation stockpiles outweighed the risk of a softening U.S. economy."

What is surprising is that events in Pakistan and Turkey are not likely to effect oil supplies by much, if at all. The news from these regions is having more of a "psychological" impact on trading much as a break in a Canadian pipeline did two months ago.

The failure of oil to retreat may be based on the fact that one important interruption in supply from Nigeria, Venezuela, Saudi Arabia, or any other country subject to instability, could push oil higher than $100 coupled with rising demand from countries like the US and China.

That is what is odd about the current situation in the price of oil. Usually when the price of a commodity rises 30% to 40% in a short period, demand falls quickly. But, for the time being, there is little that the large oil-consuming nations can do about cutting their need for crude. It is one of the major ingredients for GDP growth.

So, world oil prices now face the most dangerous of combinations. There could be a really large supply interruption at any time, but demand rises every year.

Douglas A. McIntyre is an editor at 247wallst.com.

Oil holds near $100 originally appeared on BloggingStocks on Mon, 31 Dec 2007 09:30:00 EST. Please see our terms for use of feeds.

Bloomberg reported after the close yesterday that oil surged $4 off the back of a report of an explosion at an Embridge pipeline from Canada to the U.S. As the world's largest energy consumer, any significant disruptions in supply of oil can send oil prices up erratically.

"Enbridge closed four pipelines, with a combined capacity of 1.5 million barrels a day," said Bloomberg. The blast took place at Enbridge's Clearbrook, Minnesota terminal and killed two workers. The company said today the fire was still burning.

The same article quoted Rob Laughlin, a senior broker at MF Global Ltd. in London. Oil "could go up further if it's shut for some time.''

Investors saw a very strong showing yesterday in the U.S. markets with the Dow Jones Industrial Index soaring 331 points, or 2.55%. Many pundits felt that the surge was a reaction to the markets being oversold coming into yesterday with a confluence of other factors, including the price of oil abating a bit.

With this announcement and reports of OPEC pumping all they can, oil prices will most likely stay elevated at least for the foreseeable future. U.S. crude oil stockpiles fell 452,000 barrels to 313.2 million last week, the Energy Department said yesterday.

Zack Miller is the Managing Editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund.

Pipeline bursts in Canada sending crude oil up originally appeared on BloggingStocks on Thu, 29 Nov 2007 09:22:00 EST. Please see our terms for use of feeds.

Consumer confidence at a two-year low originally appeared on BloggingStocks on Fri, 09 Nov 2007 11:11:00 EST. Please see our terms for use of feeds.