Oil Prices

It is strange how a couple years ago, oil had no bearing on our overall economy. Fast ofrward to today and it seems as though the price of oil is what moves the market more than anything. The explosion of oil prices is suspicious and I said for a while, had to stop. Fundamentally, there was no evidence supporting the possibility of oil prices rising more and more. Most of the market was being driven by oil futures speculators and media.

In the last month we have seen a correction, much to our wallet's liking. Price have dropped from $145.85/barrel to the $115/barrel mark today. This is a decline of about 21% in about month. I had been saying since early June, that prices would be dropping, but it took longer than I expected. Trying to take advantage of this, I had a short on the oil and gas index using powershares 2x inverse ETF (DUG), only to realize that this doesn't necessarily correlate with the price oil, as much as it does the entire index (as the name states). I sold this position in mid-June, and bought into another Powershares 2x inverse, but this time it was one that correlated with the Crude Futures market - DTO it is actually an exchange traded note, which is similar to an ETF, but for debt. In this case it is a mixture of oil futures contracts.

I found that DTO correlated much closer with the prices of oil, and in the last 2 to 3 weeks it had started to go up (as oil went down), I put a stop order on it at 30 and thought that I should be happy such a dramatic drop in a couple weeks, then this week it slid further and now at close after a crazy oil week this week, DTO is at 33. That is even with news of a pipeline explosion in Turkey which produces nearly 1% of the worlds daily oil output, and the unrest in Georgia. I find it interesting how much new articles change over the course of a couple months.

I sit at my desk and read news and watch CNBC all day, and decided that to fill time and space media will continue to fabricate how bad something is just so they have a story. It is ridiculous the way they spin things to make them negative.

for instance this article from seeking alpha talking about how high oil will continue to rise (and the numerous other articles stating how much trouble that spells for our economy):
http://seekingalpha.com/article/78322-are-high-oil-prices-here-to-stay

And then an article from Yahoo Finance today about low prices being bad for the economy:
http://finance.yahoo.com/tech-ticker/article/45612/Why-Oil-under-100-Is-Bad-News?tickers=fslr,xom,bp,vlo

It is disturbing how much influence media actually has on our economy, and if they want any news to be negative, they will make it so.

Financials Lead a Recovery?

After a day like yesterday, things were looking good for the entire market, but of course another financial has even more problems. It was announced that Freddie Mac (FRE) had a 2nd quarter loss of $821 million, more than the analyst expected, leading me to believe yet again that we are a couple months away from any kind of market recovery.

It has been shown in the past few down markets that financials always lead the way to a recovery, is it true this time? I wouldn't count it out because no matter how you slice it, financials are where the financial gurus always feel comfortable evaluating value and price. Their bread and butter. I was telling a friend of mine the other day that financials seem to be indicative of market conditions, solely because a fund manager with an MBA, CFA, Etc. feels comfortable in financials, because it is what they know better than any other industry.

Another sector that could lead us out of this is infrastructure. Let's face it the US has a lot of work to do in this arena, and if they commit billions of dollars toward it (which both McCain and Obama pledge to do), this will not only create jobs, but also revitalize the US. The big question is: Will the financials have taken care of their CDO and MBS subprime mess before the infrastructure boom, or after?

1st Blog

This is my first blog, so I guess a good place to start is by establishing a purpose.

I'm not really sure about where I intend to go with this blog, but I know it will be some how related to finance. Whether it be market conditions, portfolio ideas, links to good articles (which is very likely, as I read a lot and want to share them.), or actual stock picks.



Stay tuned and happy blogging!

-J