Oil as an investment

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.

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?

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

Good news! Barack Obama is effectively the President already.

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?

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

These CNBC ads are driving me nuts...

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?

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

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

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

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

"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

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.