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MORE STUPID POLITICIAN TRICKS By Mike Gasior Over the course of the past six years I have devoted plenty of time hanging out an assortment of politicians to dry for a seemingly endless array of stupid comments and deeds. Truthfully, I would generally prefer to avoid wasting all of our time and effort focusing on these morons, but there are simply occasions where I cannot help myself. Sadly, this is one of those months, but I will attempt to make my point concisely and efficiently. THE NOVEMBER VIDEO COMMENTARY IS UP I have really enjoyed spending this year giving these short lessons on a variety of financial topics and this month is no exception. We are in the midst of covering several Derivative topics and this edition is dedicated to futures and forward contracts. It has been my experience that the tendency of people is to make these vehicles MUCH more complicated than they need to be when they are actually more simple than most would expect. Futures contracts are somewhat odd because of the way the margin requirements work, but odd does not mean complex, and I hope I can clarify things a little for you when you view the video. You can watch both "high-speed" and "low-speed" versions of the commentary by visiting: http://www.afs-seminars.com/v-commentary.html ONTO THE POLITICIANS Rather than just come out swinging wildly at our grandstanding group of goofy gadflies and their gaggle of grandiose but grotesque suggestions, let me first explain the motivation of these geniuses. In the last couple of weeks, the 29 oil companies who are members of the S&P 500 announced that they expect to make profits of approximately $96 billion for 2005. That is an increase from the $68 billion that they made in 2004 and the $43 billion earned in 2003. It now appears that making substantial profits like this is quite upsetting to members of both political parties of the world's largest economy and model of capitalistic efficiency. Let me review for you some of their comments and proposals: *Senator Judd Gregg, Republican from New Hampshire called in congress to take "a serious look at reinstituting an excess profit tax on oil companies with the proceeds being put towards the low-income home energy assistance program and deficit reduction." He also added that "it is apparent that the oil companies have taken advantage of the trust of the American people. Some might call this a novel approach for me, but I cannot sit back in good conscience while those in our society struggling to heat our homes are being left in the cold by the oil companies." *Senator Chuck Schumer, Democrat from New York said, "It's become perfectly clear that the big oil companies are cashing in while average American families are being bled dry." *Speaker of the House, Dennis Hastert, Republican from Illinois at least admitted, "Oil and gas companies are enjoying record profits. That is fine. This is America." But then he added that "Our oil companies need to do more to inform the American people what they are going to do to bring down the cost of oil and natural gas. When are new refineries going to be built?" *Senator Charles Grassley, Republican from Iowa, wrote in a letter to the American Petroleum Institute that "it's time for the companies to help out low-income Americans who need assistance with their heating bills"; and then suggested that the oil companies donate 10% of their third quarter earnings to the Low Income Home Energy Assistance Program (LIHEAP). *Senator Byron Dorgan, Democrat from North Dakota told reporters "Talk is cheap. The question is what is Congress going to do, if anything, about this unfairness? Then he added, "The money really belongs to the people. I'd really like to see a rebate." Senator Dorgan then announced that he and Chris Dodd of Connecticut would be sponsoring legislation to tax "excess" profits earned by oil companies. *Senator Larry Craig, Republican of Idaho thinks, "Consumers are increasingly feeling that they are being taken for a ride." *Governor Matt Blunt, Republican from Missouri thinks that the oil companies should contribute some of their "swollen profits" to the program in his state that aids poor families to pay their heating bills. *Governor Jim Doyle, Democrat of Wisconsin actually plans to subpoena oil company executives to Madison to appear at a public hearing regarding profits they earned in the wake of hurricanes Rita and Katrina. Backing him up is Democratic State Senator Russ Decker who has introduced a bill that would return the oil companies "excess profits" to Wisconsin taxpayers in the form of income tax credits. Quite frankly, I could have continued to list quotations ad nauseum, but you get the drift from the sampling I've shared with you. The issue is simply that politicians don't like it when companies make too much money. Now I'll give you some things you can quote ME on. --Who gets to decide how much profit is too much profit? Do we begin to tax Dunkin Donuts and Hallmark when they are making too much money, or will people simply stop buying donuts and greeting cards and the situation will self correct? --Where was the outrage from the politicians back in 1998 when crude oil prices got down to nearly $10 per barrel and the oil companies were bleeding red ink out of every orifice of their bodies? It seems apparent that there is only concern when corporations make too MUCH money and very little concern when the companies are losing millions of dollars per day. This was also the dark period for the oil companies when budgets for new exploration or refining capacities were cut to nearly zero and we are feeling the effects of those cuts right now. --The politicians wonder when new refineries are going to be built, yet there hasn't been a new one built in almost 30 years and there isn't a city or state anywhere who is likely to grant a permit to allow one to be constructed. It is nearly impossible for the oil companies to get a permit to EXPAND existing refineries. Maybe the Congress should legislate that local municipalities MUST allow oil companies to build refineries anywhere they damn well feel like. Since Speaker Hastert thinks this is such a terrific idea I would venture to suggest that Illinois get the first of these new refineries. --Doesn't it seem somewhat oxymoronic to think that taking monies away from the oil companies "excess profits" might actually reduce the amount of money they might be able to spend on drilling new wells and building new refineries? --There are still several areas within the borders of the United States that contain significant, proven oil reserves in the Rockies, Alaska and the Gulf of Mexico. For all the lamenting and the hand wringing going on in Washington D.C. right now, isn't it peculiar that the United States Government is the one preventing drilling from occurring in these areas? --Does anyone remember what happened at 4:11 p.m.,
Eastern Time on August 11th, 2003? Well, 40 million people in the
northeastern U.S. and 10 million in Canada lost power, some of them
for a substantial period of time. Outage related losses were estimated
at $6 billion. About two hours into the --Members of the U.S. Congress and Senate make between $158,300 and $203,000 in government pay, which I propose is too much. I offer that each of these members should contribute a minimum of 25% of the gross salaries to a fund that will pay for classes that focus on economics and the operation of free markets. These classes will be mandatory for all members of the House and Senate. Additionally, any member making statements substantially similar to the ones I listed above with be subject to $5,000 supplementary fines per incident. MORE TRUTH FOR YOU ABOUT OIL I have dedicated tons of space over the years to the oil markets, and even made it the focus of my May issue this year titled "The Truth About Oil". Here is a small portion of what I wrote back then just six months ago: ************************************************* In conversations I have with people about this topic, I get this sense that the belief is that Saudi Arabia, Russia, Venezuela and other oil producing countries could simply ratchet up their output to satisfy any shortfalls. The truth of the situation, however, is that all these countries are basically running all-out right now and have very little excess capacity left and no genuine prospect of substantially increasing output. I wrote a few months ago that the United States had not built a new oil refinery in 30 years and none are currently on the drawing board. Current refineries are running well over 90%+ capacity already. For these reasons, even the slightest interruption in the oil markets (hurricanes, wars, political squabbles) will instantly impact the price of oil. This resulting volatility will have a damaging effect on consumer sentiment and confidence. Certainly there can be improvements in technology and conservation efforts that could smooth the transition from fossil fuels to alternative sources, and while many of these are viable alternatives, none of them are going to be ready in an adequately fast period of time. Since necessity is almost always the mother of invention, it won't be until the environment of higher priced oil appears permanent that consumers and governments will commit themselves to changing their lifestyles. At that point it should take the better part of a decade for the changes to truly begin to be implemented and take effect: Making for a pretty miserable decade. What can you do to begin for the transition? --Begin thinking about a more fuel-efficient car right now before everyone else is rushing to buy one. I heard stories of 3-year old hybrid cars selling on eBay for thousands over their original price when gas prices popped upward earlier this year. That sort of behavior is both hysterical and stupid. Since the life cycle of a U.S. automobile is currently 17 years, put yourself ahead of the curve and get yourself something more efficient now and take the money you immediately begin saving into your retirement account. --Think about how you can begin conserving energy costs around the home with energy saving appliances and light bulbs whenever new ones are required anyway. --When this all begins the major oil companies will appear as though they're printing money in their basements, so doing some research of your own, and picking a couple of the quality oil stocks out there, might be a good investment. The summary is that oil and gas prices are never going down in a substantial way again, and you should consciously be keeping that in the back of your mind when you make personal and business decisions regarding energy. It might alter your approach and your actions more than you would suspect. ************************************************* You can read the entire newsletter at the following link: http://www.afs-seminars.com/newsletter_May_2005.html Even with all the truth I shared back then, I thought I might put all the foolish comments from politicians into some perspective (as well as perhaps further educating readers so they can make more informed life decisions) by sharing some more FACTS with you this month, so here goes. THE TOP TEN OIL-CONSUMING COUNTRIES 1) United States 20.5 million barrels per day THE TEN COUNTRIES WITH THE LARGEST PROVEN OIL RESERVES 1) Saudi Arabia 262.7 billion barrels ANNUAL SPENDING ON DISCOVERING NEW OIL The Year 2000 - $63.1 billion NUMBER OF NEW OIL WELLS DRILLED ANNUALLY 1980 - 32,639 (Also, the number of new wells drilled exceeded
40,000 annually during a AVERAGE DEPTH OF A NEW OIL WELL 1980 - 3,810 feet MONEY SPENT PER BARREL FOR NEW DISCOVERIES 2000 - $4.94 per barrel SUMMARY OF ALL THESE FACTS You don't need me to summarize anything for you since there is not one single fact that should give you the impression that oil will ever be as plentiful as it once was, or that is will ever be much cheaper. A somewhat scary statistic is that if China and India ever bring their oil consumption rates to half of the U.S. rate (per capita), global demand for oil would double from the level it is at right now. That's just plain horrifying. I'm not trying to be an alarmist or doomsayer, but there are forces at work here that politicians have very little ability to fix so maybe they could do us all a favor and please shut up. But if you would like the vision of someone who IS actually a doomsday type, consider this idea: $190 PER BARREL OIL THIS WINTER!! There is a gentleman named Matthew Simmons from Houston who is an expert in the oil markets and the best-selling author of the book "Twilight in the Desert" who thinks oil is still WAY too cheap. Just a few weeks ago, Mr. Simmons was quoted as saying, "Prices are really cheap today and they need to go a lot higher, and they probably will go a lot higher." He warns that too much was destroyed during the hurricanes this year and not enough production has come back online yet. He also thinks that a pretty cold winter in the U.S. this year could lead to a very high risk of natural gas curtailment (simply stopping the flow of natural gas). Mr. Simmons warns, "Either one of these events (oil product storage or natural gas shortage) could send prices two or three times higher than they are today." Crude oil was around $62 per barrel when he made those comments and natural gas was at $13 per million BTU's. Easy math brings oil to about $190 per barrel and natural gas to $40 per million BTU's. The theory he puts forth in his book, "Twilight in the Desert" is that Saudi Arabia has been overstating their oil reserves for years and that they are at, or very near the peak of their oil production. And you though I was the alarmist. ONE MORE STUPID OIL COMMENT Mr. Adnan Shihab-Eldin, acting Secretary General of OPEC said recently at a conference in Rimini, Italy that oil companies should be using some of their profits to increase refining capacity. "We've been saying this past year that refining has to increase," Shihab-Eldin said during a break in the meetings. "There needs to be more refining and upgrading." Since everybody seems to have suggestions to offer regarding the current state of the oil markets, I have a couple of suggestions of my own for Mr. Shihab-Eldin. Suggestion one is that he go home from the conference and tell his member countries to stop funneling their oil profits into terrorist activities and giving money to the families of supposed "martyrs" who die in the cause of killing innocent people around the globe. Suggestion two is that he and his members go screw themselves. IMAGINE THIS High school football player Bobby Martin received
an official apology from the Ohio High School Athletic Association
(OHSAA) recently. It seems that Bobby, who plays for Colonel White
High in Dayton, was barred from playing in a game because he was
not wearing the shoes and kneepads required by The troubling aspect of the story is that Bobby was born without any legs, but has been a contributing member of the punt return team since he is able to move around the field very quickly using his arms. Bobby gave thought during halftime to having a trainer use athletic tape to tape the required shoes and kneepads to his chest and then attempting to play in the second half of the game. When asked about the situation, Bobby said, "That's the first time in 17 years" that anyone had ever actually made him feel disabled. Some moron from the OHSAA said that the referees were just being overly cautious. This is just another story that proves that some people should just be taken somewhere and beaten with hammers. A TERRIFIC CONCERT I was very fortunate to attend Sheryl Crow's concert at the Hollywood Bowl just over a week ago and she put on a tremendous show. While I have enjoyed her music since she broke out with "All I Wanna Do is Have Some Fun", I couldn't have honestly labeled myself a "fan". My status has now officially changed though, and I can bear witness to the fact that Sheryl is one of the most proficient and professional musicians of her generation. I've always had a particular appreciation for the singer/songwriter combination and Sheryl Crow is a worthy member of the list of woman who I think are among the best songwriters of all time; Jonie Mitchell, Carole King, Bonnie Raite, Dolly Parton, Emmylou Harris, Jewel and Alanis Morriset. I also cannot ever remember seeing Sheryl Crow wear anything but pants so it was almost startling to see her walk onto the stage sporting a very girly white dress. Very incongruent. Her set was terrific and she has assembled a great group of musicians to back her up and they can make a fabulous noise. If you get the chance to see her on this current tour you won't be disappointed. I'm not certain that he'll be opening for her on any other dates, but Gavin DeGraw opened for her at the Hollywood Bowl and did an excellent set of his own. His band was tight and enthusiastic and Gavin was a damn good showman for a guy I honestly didn't know much about previously. The job of the opening act is to get the crowd pumped and ready for the headliner and Gavin was worth every dime of what Sheryl Crow paid him that night. Finally, I was almost as excited to finally see the Hollywood Bowl (truthfully, equally excited) since it is one of the more storied venues in music history. All I can tell you is that I was not disappointed in the least. I have always loved outdoor settings and have had many great nights at the Greek Theatre, but the Hollywood Bowl is one of the greatest places to take in a concert that you will ever see. Not to mention the concession offerings are extensive and not nearly the rip off you might expect (a BOTTLE of wine for around 20 bucks). Should you find yourself in Los Angeles someday, check to see what might be playing at the Hollywood Bowl. You couldn't ask for a better night out. FINAL THREE SEMINARS OF THE YEAR As the year winds down I only have three more sessions I will be presenting this year in New York. We use a terrific hotel at the corner of 38th Street and Madison Avenue called Madison Towers Hotel, a member of Italy's Jolly chain of properties and it is extremely convenient to both Penn and Grand Central Stations. The program list is as follows and the links will take you to complete descriptions of each class: --Securities Operations, Processing & Accounting --CMO, ABS & CMBS Securities --Advanced Securities & Markets All of the sessions are filling up, but as of this moment there is availability in each of them if you or your colleagues would like to register. The fastest and easiest was to sign up for any program is to visit our online registration form, which takes only a minute or so to complete. That link is: http://www.afs-seminars.com/register.html We have already begun booking dates for in-house sessions for our client companies, so if there are any of our seminars you would like to hold for your staff at your location, please call my offices at (860)347-6568. All you need are 10 people attending and my staff will be glad to send me to your site to present any of our programs. You can view a list of all our topics at: http://www.afs-seminars.com/courses.html YOUR MONTHLY BRAINTEASER This month I've decided to take a completely different direction than the many varied topics for your monthly quiz. I found the answer extremely fascinating and I will be curious to hear from anyone who ACTUALLY knew the answer without peeking at the website to see it first. I'm even going to give you a couple of hints to try to steer you in the right direction. Here goes: "What do all the following items have in common: Bulletproof vests, fire escapes, windshield wipers, laser printers and circular saws?" Your hints are that the answer has nothing to do with the materials they are made out of or the methods used in constructing them. Good luck, and when you finally surrender you will find the answer at the following link: http://www.afs-seminars.com/brainteaser_Oct2005.html The answer to last month's brainteaser is: "The profit margin on the Model T was only $2. The Ford Motor Company hoped to reap large profits selling spare parts for the car at their 48,000 dealer outlets." Copyright 2005, Michael Gasior. All Rights Reserved. |
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October
2005 Newsletter
