Local Real Estate Comments and Ramblings

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Solving the Oil Crisis?

 My dad is without a doubt one of the smartest people that I know.  This isn't a fathers day tribute or anything i am simply stating what I belive is a fact!  He has spent over 50 years as an investmetn analyst and his area of expertise is as a technical analyst for the stock market.  He does an email newsletter for his clients and sends me copies all the time.  Very honestly, a lot of the stock market stuff i don't understand.  Hey, I'm just a simple minded real estate agent.

But when I got this email from him "Solving the oil crisis" Iwas anxious to see his take on it.

Below is his email.  I have just a few comments to add.  I'll put those afterward.

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"JAN 13, 2008          MORNING MARKET COMMENT                 DOW 12,131 UP  47.23

HOW TO SOLVE THE OIL CRISIS

I WILL JUST SPEND A SHORT TIME ON THE MARKET TODAY THEN GET INTO THE MAJOR THEME.  YESTERDAY THE MARKET HAD THE RALLY I EXPECTED.  IT WAS A SHORT COVERING RALLY THAT THE DOW WAS UP 185. IN THE FIRST HALF HOUR AS OIL WAS DOWN $4.00. LATE IN THE DAY OIL WAS UP $.36 AND THE MARKET RALLY HAD FADED TO ALMOST NOTHING WITH ABOUT EVEN BREADTH.

THE OIL CRISIS: I BELIEVE THIS CAN BE SOLVED WITH A FEW SIMPLE STEPS. NOW EVERY ONE IN THE USA IS PAYING FOR THIS PROBLEM. WE SEND MONEY TO THE MIDDLE EAST AND ACT STUPID.  WE ARE A DEBTOR NATION THAT NOW WATCH AS THE OIL TYCOONS IN THE MIDDLE EAST BUY OUR COMPANIES AND LEND US MONEY.  WE FILL OUR TANKS AND SEND THEM MORE MONEY. YET I SEE NO LINES FOR OIL AT THE GAS STATIONS. WHY IS OIL HIGH?

SPECULATION. MARGIN REQUIREMENTS ON OIL IN THE PITS IS NOW 5%. THE HEDGE FUNDS , PENSION FUNDS, AND OTHER SPECULATORS MOVE THEIR MONEY OUT OF THE STOCK MARKET WHERE MARGIN IS 50% AND MOVE IT INTO OIL WHERE IT IS 5%. THE STOCK MARKET GOES DOWN AND OIL GOES UP.  THE BIG BROKERAGE FIRMS MAKE HIGH PROJECTIONS ON OIL PRICE AND THEY COME TRUE.  THE SPECULATORS RULE.  THEY DO NOT INTEND TO TAKE DELIVERY ON THE OIL THEY BUY, THEY JUST BUY TO MAKE MONEY.  BUY $100,000,000 MILLION IN OIL CONTRACTS, IT GOES UP 5% AND NOW THEY HAVE $200,000,000. SPECULATORS HAVE TAKEN CONTROL.

I HAVE BEEN IN STUDYING THE MARKET FOR OVER 50 YEARS AND HAVE A GOOD MEMORY. MARGIN USED TO BE FLEXIBLE.  WHEN THE STOCK MARKET PLUNGED MARGIN USED TO BE DROPPED.  WHEN IT GOT OVER HEATED MARGIN WAS INCREASED. THE HELPED SMOOTH THE MARKET OUT.  AND WOW.  DID IT REACT WHEN MARGIN WAS CHANGED.  DID IT REACT WHEN THERE WAS FEAR OF MARGIN CHANGE

NOW RAISE OIL MARGIN TO 50% I BELIEVE YOU WOULD SEE $70-80 OIL.  THAT IS ALMOST IN HALF.  JUST THE FEAR OF THIS HAPPENING WOULD MAKE OIL FALL AS THIS WILL WIPE OUT MANY  SPECULATORS.

GIVE INCENTIVES TO DRILL FOR OIL IN THE USA. TAKE THE RESTRICTIONS OFF. DRILL OFF THE COAST, DRILL IN THE MOUNTAINS, DRILL IN ALASKA.. I LIVED IN FLA DURING KATRINA. NO OIL WAS SPILLED IN THE GULF FROM THE RIGS THERE.  MANY OF MY FRIENDS LOVED TO FISH NEAR THESE RIGS AS THAT IS WHERE  THE FISH WERE. THE CARIBOU WILL SLEEP NEAR THE PIPE LINES. THEY DO NOT CARE. IF THE POLITICIANS ARE WORRIED, MOVE THE CARIBOU.

OBAMA IS YELLING EXCESS PROFITS TAX.  I HAVE SEEN THIS HAPPEN OVER THE YEARS.  IN PLAIN TERMS IT IS STUPID.  IT GIVES THE POLITICIANS PORK BARREL MONEY AND TAKES AWAY THE INCENTIVE TO DRILL.  WILD IDEA....GIVE THE OIL COMPANIES MORE TAX BREAKS AND INCENTIVE TO DRILL.  I REMEMBER THE  27.5% OIL DEPLETION ALLOWANCE IN THE 1950'S.  THIS WAS THE LAW THAT GAVE THE OIL COMPANIES A TAX BREAK TO DRILL. TAKE AWAY INCENTIVE AND RAISE TAXES ON THEM AND THEY DRILL LESS, GIVE THEM TAX INCENTIVES AND THEY DRILL MORE  WOW.  IT WORKED. IS NAY ONE IN WASHINGTON  BOLD ENOUGH TO SUGGEST AND EXPLAIN THIS?

FLEX FUEL CARS: IN BRAZIL OVER 80 PER CENT OF ALL NEW CARS ARE FLEX FUEL.  GIVE THE CAR COMPANIES TAX INCENTIVE TO BUILD THESE IMMEDIATELY.   IF I WAS MCCAIN OR OBAMA I WOULD DO NOTHING BUT PUSH THIS PROGRAM IMMEDIATELY  SAYING "I AM THE MAN OF THE PEOPLE, LETS SOLVE THIS PROBLEM TOGETHER." I BELIVE THIS CAN GET EITHER ELECTED PRESIDENT.

  THIS IS THE NUMBER ONE PROBLEM ON AMERICAN'S MINDS.  THIS IS A PROBLEM THAT A STRONG PRESIDENT ,A STRONG CANDIDATE AND CONGRESS CAN SOLVE.

JUST THE FEAR OF ADOPTING A PROGRAM LIKE THIS WILL DRIVE OIL DOWN AND I BELIEVE THE STOCK MARKET WOULD GO UP 1000 TO 2000 DOW POINTS."

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So what does this mean?  Here is my take from it.  The people that are fueling the speculation on oil prices are the same people who fueled the specuation on mortgage backed securities and the dotcoms before that!  These specualtors are driving up the prices!

The only other additional comment that I had is regarding Brazils energy independance. Their cars are fueled with ethanol produced from sugar.  In the US the gov't is subsidizing CORN to increase crop production.  Production has increased and its all going into our gas tanks instead into the world food market.  Corn is a very inefficient source for ethanal. It is NOT answer.  Aroung the world there are countries having food riots over shortages.  The policy to promote corn as an ethanol source needs to end.  Corn is food ... not fuel.

Write to your congressman and get them to intervene on the issues of 5% oil futures margins!

 

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After i posted the origal blog my dad sent me a littel extra info to share:

"THE FEDERAL RESERVE BOARD  DETERMINES MARGIN RATES UNDER REGULATION T..  BUT THEY CAN GET A LOT OF PRESSURE FROM WASH. HAVE A GREAT WEEK END. "

 

*****

 

 


Bob Southard
Broker - Owner  Atlas Realty Service LLC #75911

O:678-439-SOLD(7653)

CALL ME DIRECT: 770-656-9134

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Comment balloon 12 commentsBob Southard • June 14 2008 01:07PM

Comments

Very intersting article. I agree with the concept of drilling here rather than just giving our money to the middle east

Posted by Tim Haight, Broker/Owner (Pinal Realty & Property Management LLC) over 10 years ago

Good letter.

DRILL HERE! DRILL NOW! PAY LESS!    www.americansolutions.com   It's a great ideas driven site.

As for any alternative fuel sources:  We should put our brains to work with the concept of hydrogen fuel-celled vehicles.   And some more nuclear power plants.

But let's get going on retrieving the billions of recoverable barrels of oil and natural gas that's available to us in and on our OWN lands.

Posted by Owen Zweiback (Realty World Florida) over 10 years ago

Oh yeah and with a unified and sound energy policy from congress and our President; the speculators, which so many folks want to make out to be the boogyman and legislate law preventing them from speculating, would drop like a rock and sell short without any legislation needed.

Posted by Owen Zweiback (Realty World Florida) over 10 years ago

Bob, very well thought out article, and very interesting.  I agree that we need to correct the market first, then work on our own oil supply and alternatives to oil.  Very well done, your father is very astute!

Posted by Tony & Darcy Cannon, The C Team (Aubrey and Associates Realty) over 10 years ago

Nice technical side of the oil issue. I am all for ending the corn for fuel idea. Also, I signed Newt's petition. Lets drill here and tell the Dems in Congress to let it happen. They don't get it.

Posted by Kevin Robinson, Fractional Developer over 10 years ago

Thanks everybody for the great comments. 

 

After i posted the original blog, my dad emailed me a littel more info which I amm adding to the original post.

Posted by Bob Southard, e-Pro - Cobb, Cherokee, North Fulton (Atlas Realty Service, LLC) over 10 years ago

I'm with Owen on this as well - DRILL HERE! DRILL NOW! PAY LESS!    www.americansolutions.com Go sign up today!

Posted by Simon Conway (Orlando Area Real Estate Services) over 10 years ago

It is very simple, it should be done.

Posted by James Graner (Residential Services: http://appraisalmo.com) over 10 years ago

I am trying to get everyone I know to sign Newt's petition.

Posted by Kevin Robinson, Fractional Developer over 10 years ago

Great article! Great solutions, especially love the speculators thing and tax incentives.  I want someone to tell me how taxing the oil companys will produce 1 more barrel or lower the price we pay.

Posted by Susan McQuaide (Keller Williams) over 10 years ago

Exactly. That is why we don't want to raise their taxes. Sign the petition Susan at americansolutins.com.

Posted by Kevin Robinson, Fractional Developer over 10 years ago

Thanks everybody for all of the input.  I have gone and signed the petition as well.  Keep all the great comments coming.

www.americansolutions.com

AS far as taxing the oil companies (or any company for that matter) people need to understand that corporations don't pay taxes.  They just pass the cost of the tax along to the consumer.  so if the goernment taxes a corporation  the only income the corporation has is the income from the sale of its product or service.  WE pay for it in the end.

 

Posted by Bob Southard, e-Pro - Cobb, Cherokee, North Fulton (Atlas Realty Service, LLC) over 10 years ago

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