Jun

7

Oil and energy prices skyrocketing. Food prices soaring. Home prices tanking. Jobs shrinking. Things are looking pretty bleak. Living through these times can be a real roller coaster ride.

For those of you not saddled with debt there are some potential long and short term opportunities out there.

Energy prices are heading upward. They will likely level out at some time in the future (who knows when), but it is highly unlikely that we will ever see gasoline under 3$, even 4$ again in the good ‘ol USA. It is already over 8$ in many parts of Europe. As I said in a previous post, the answer is to build cars that increase MPG. What is the most popular vehicle? The Prius. Gas hog vehicles sales are plummeting, fuel efficient vehicle sales are on the rise.

US auto dealers are being tight lipped. While their management can be a bit stodgy and slow to react they too can read the tea lives. In fact, it may very well be the energy crisis that cause both GM and Ford to get busy and to emerge again and compete with the likes of Honda and Toyota.

Rising gas prices are going to create a demand in the market (it already is) for fuel efficient cars. In two years time we have gone from an average price of $2.25 to $4.50 a gallon and still climbing. At $5.00 a gallon (not far away) it is going to cost you $3600 a year to drive your 20mpg car 12,000 miles. Compare this with $1350 just two years ago! At $8.00 a gallon the cost will be $4800.00 a year.

Ford is allegedly working on a technology called hydraulic hybrid which could lead the way. There are rumors of an F-150 that can get 60mpg. GM is working on hybrid technology as well. Both stocks are currently in the tank (Ford has been for years).

If you have some patience, and are willing to take some risk this might be a good time to start buying auto stocks. This is bit of a contrarian view. And, there is no guarantee that US Automakers will see the writing on the wall.

 

 

May

31

This ain’t the late seventies.

Remember the seventies? Gas prices hit .90 cents a gallon in 1979. How about the oil embargo in 1973? The average price of gas in 1973 was .65 cents, up from .52 cents in 1972. Of course this change was not a linear .13 cent increase across the board. Rather, it was a few months in the year where there were huge gas lines, stations ran out of gas, and prices approached nearly $1.00 a gallon which was a chunk of change back then (still less than we pay now if adjusted for current times!!!) Add to all of this a flood of cheap foreign imports and American auto manufacturers nearly went into the abyss.

Why?

Foreign imports were cheaper to buy. They got mpg 2 to 2.5 times that of American gas guzzlers.

Detroit started making subcompacts and fuel efficient (for the times) cars. Remember the Citation, Chevette, Monza, Omni, Fiesta? Chevy even made a pickup truck (LUV) that got close to 40mpg (unloaded) city and close to 50mpg on the highway. Oh…how we forget.

So What happened?

Oil prices came back down and Detroit again started making gas guzzlers. Actually Detroit caused the foreign auto manufacturers to make bigger less fuel efficient cars to keep up. Fact is business is driven by consumer demand. With lower gas prices Americans could afford to trade in their cracker jack size Yugo for a roomier ride.

So?

This ain’t the late seventies. No, it is much worse (though we are a pretty clueless people these days). Less than a month ago they were predicting $3.00 a gallon gas prices and we are now over $4.00 in most parts of the country for regular. It is so pathetic that when I was filling up yesterday I began longing for the days of $3.00 a gallon gas. We can probably forget about seeing $3.00 a gallon oil ever again. And that prices did not last for very long (months). To put this in perspective, gas prices for the entire decade of the eighties ranged from a high of $1.03 (1980) to a high of $1.27 (1984).

Why?

First, there is a greater demand oil in the world than their was in the seventies. Second, do you really believe oil companies are going to reduce their prices, especially in the face of this demand?

What now?

But to make these type of cars their has to be sufficient demand for them. Trust me if gas stays at $4.00 a gallon or higher long term there will be suffient demand. The only way to deal with this is to make cars that get double the mpg of current vehicles. This way everything is relative.

What else?

The Chrysler $2.99 a gallon price rebate for three years is a good short term strategy for selling their gas guzzlers and reducing inventory. Others should follow suit. But, buyers had better be sure that they can afford the price of fuel after the three years as they will be unlikely to unload their vehicle and who know what the price of gas will be in three years.

Parting gifts…

We can quit whining too much. Most of Europe is currently paying between $8.00 and $10.00 for a gallon of gas.

As a barrel of oil is now selling for over $125.00 you will be amused to know that in 1959 oil sold for .18 cents a barrel.

Jan

26

How soon we forget.

The government plans to send many of us checks so we can go out and spend this money and put it back into the economy. What is this money they will be sending us? It is an advance on your “anticipated” income tax return for fiscal year 2008 earnings.

This would not be the same concept as getting a payday loan how???

Why major media does not tell you this is beyond me. Why our government does not tell you this is beyond me.

So…I am telling you. Here is how this Government Stimulus Package is going to work (and this is the same as the last time they did this). We will assume for the sake of our example that the government will send you a check for $500.

If you will be getting a $1000 tax refund when filing your 2008 income tax return you will only be getting back $500, as Uncle Sam already fronted you the first $500.

If you will be getting back a $200 tax refund when filing your 2008 income tax return then you actually owe the government $300.

The key to dealing with this rebate is knowing in advance if you will owe the government or if they owe you when you file your tax return next year on this years earnings. If you know you are getting a refund from your tax return you can consider this payment up front. If you typically owe the government money at tax filing time then you might be best to take this money and put it in the bank as all they are doing is floating you a loan that you will need to pay back in one lump sum!

Jan

19

Live Within Your Means

We have created quite the mess with this subprime debacle. We want to blame business,  business wants to blame the government, wall street is reeling.

Happy times

Unfortunately I think the slide has just started. Lets take inventory…

… Absolute Insanity …

I guess since it has been a while since the .COM insantity we needed a new means of losing our minds.

If you really think about it this has been nothing more than the old cliche “if it too good to be true it probably is”. The sad thing though is people actually made a great deal of wealth while many are now losing what little shirt they had to begin with. “I want it now, I’ll deal with the consequences later”.

Fact, is subprime lending has been going on for years. I remember when I was young, poor, and just starting out having a loan with HFC for a stereo and paying 25% interest.

Subprime lending for those of you that only know the buzzword is the market for those with “less than stellar” or “lack of” credit history. In exchange for outrageous interest rates and fees lenders will give money to people that have a poor record of paying it back.

Don’t get me wrong. Anyone, even the most disciplined person, can fall on financial hard times. The subprime market can be a means of re-establishing ones credit. But subprime lending became sheer insanity that now has us heading into the crapper.

The exposure by major financial institutions into the housing subprime market is just staggering. It is hard to identify these institutions until they report staggering losses.

According to CNN state by state going back to 2005 the entire Puget Sound (Greater Seattle/Tacoma/Everett and surrounding suburbs) had a 22% exposure. Much of California (25% statewide) and Florida (30% statewide) deeply buried in a sea of subprime lending.
http://money.cnn.com/magazines/fortune/storysupplement/subprime_statebystate/

And here we stand today in all this chaos. All because people are not willing to live within their means. All because of the greed of business. All because our government turned its head because at the time the alternative was a slowing economy.

I think we should ammend the “if its too good to be true it probably is” to “If you have the means to get in during the bubble and out before the burst you can exploit and profit at the expense of your fellow man”

I think maybe Countrywide and a few others waited too long. Eh?

Dec

30

1. Spend what you make

2. Create a budget and stick to it

3. Begin to make more than the 4% required minimum payment.

Will this hurt a bit? Of course it will…but what are your goals?

A) To keep your debt at its present level.

B) To keep increasing your debt.

C) To pay down your debt.

The choice is entirely up to you.

Have a great upcoming new year.

Jul

6

I never understood why folks gave their quality stuff away for free. But my life has been quite easy since giving away our budgeting software.

If you use Excel we have a great deal of high quality spreadsheets you can download and use for free. http://www.everydollarmatters.com/ . I intend on keeping these up to date each year as I also use them as well.

Are there drawbacks to free? Of course. If I was taking your money I would need to be much more responsive to questions and support. With free comes a greater independence on your part. Yep, heres the software, here is the users manual. If you an independent sort it is a pretty good deal.

If you require support there are lots of other vendors out there whose product you can buy.

 

 

 

 

Feb

17

You have until March 15th to spend the funds you have in your “use it or lose it” flexible saving accounts. Here is a link to an article on Kiplinger with some ideas on how to spend your remaining flex fund dollars.

Cheers

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