Re: Tax refund checks

"Richard F. Sayage" <rsayage1@xxxxxxxxxxxxxxxxxxxxxxxxxxx> wrote in
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"Steven Bornfeld" <dentaltwinmung@xxxxxxxxxxxxx> wrote in message
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Steve Freides wrote:
"Steven Bornfeld" <dentaltwinmung@xxxxxxxxxxxxx> wrote in message
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Steve Freides wrote:
"Richard Yates" <rayates53@xxxxxxxxxxx> wrote in message
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Also Hilary Clinton, and Grampa Mc Cain, want to give us a "Gas
holiday" this summer which amounts to about one tank full of
gas. Is
this what it's all come to? oh dear dear!
Actually, it will amount to less than that. Dropping the $.18 per
gallon tax doesn't change the supply side of the equation. Demand
will increase with the initial price reduction so prices will
quickly rise to nearly what they were before the tax holiday
started.
On "Marketplace," a program that airs on my local public radio
station while I'm sitting in the car waiting for my son to finish
his Tuesday trumpet lessons, had a few experts on today who said
the price of gasoline has absolutely nothing to do with supply and
demand.
Well, yes and no. The futures markets got a whiff of decrease in
demand, and the price of a barrel dropped over 3% today.

Unless I misunderstand this, the futures markets aren't gasoline,
they're speculation. That there is demand in the futures market
doesn't mean there is demand for gasoline. If there were no such
thing as gasoline/petroleum futures, the price would be a lot lower
now, no? If I understand the situation correctly, the record
profits of companies in this industry are due to speculation and not
supply and demand - the cost of making the stuff hasn't gone up
nearly as much as the selling price, so the people who sell make
more money.

Correct me if I'm wrong, but that's how I understand it, i.e. you
and I can both decide we want a gasoline "future" and bid the price
up as high as we like, but that doesn't mean there is more or less
gasoline in the world, or that there are more or fewer people
wanting to buy it to actually use it in their cars, to heat their
homes, etc. To want gasoline to use in your car or home is
fundamentally different than to want it because you think someone
else will want it more in the future. It's trading, not consuming.

To be clear, I'm not advocating any point of view here, political or
otherwise. I don't profess to understand economics and, Lord knows,
I don't profess to understand politics. My guess is that, at some
point, reality will set in as it usually does and the prices will
come down to a level that more accurately reflects actual supply and
actual demand for this consumable substance. We'll probably have
some sort of burst bubble of people who bought gasoline futures,
similar to people who own homes that are now worth less.

The above is the perspective of one New Jersey guitar teacher - no
expertise claimed, no studies cited, etc.

-S-

I suspect anyone who claims to truly understand all this is lying or
deluded. If the so-called "experts" were so right, the sub-prime
mess wouldn't have happened. The experts wouldn't have been caught
with their pants down when the dot-com bubble burst in 2000, when the
market crashed in '87. I'll cut them some slack for the Asian
monetary crisis in about '98 or so.
But you don't need to be a genius to know that opening the Alaskan
wilderness to oil drilling ain't going to solve the problem. Neither
will a tax holiday for gas. I wonder what our European friends who
are paying over twice what we are for gasoline think about that.

Steve

I actually do have a very good understanding of all this. Which
makes me reluctanct to answer, but here goes....

Yes and no, on the speculation versus supply and demand (S/D)
economics. The futures market is speculative, no doubt. But it also
implies a "certain" level of S/D eco.
Actual delivery (or commitment to price) is involved net net once
the contracts are settled for a particular month. This is the S/D
part.
This pertains to all futures, options on such, and all commodities,
including index futures, stock, etc. In essence, you are committing
to buy or sell a number of barrels, bushels, blocks of share, etc ...
at a particular price on a particular day. Of course, you can let the
committment go, by liquidating your buy side or sell side. This is
the speculative part.
No doubt that much of it is speculative. But, you have plastics
companies, airlines, oil, gas, nat gas, and any company using raw
commodities that are worth their salt, hedging their stock piles,
prices, future demand, etc. This goes back to the S/D side.

Richard, while it's obvious you understand much more of how all this
actually works than I do, I respectfully disagree with your assessment.
The demand you're talking about is, IMHO, still what I said it is,
demand based on the assumption that speculators will create demand.
Steve's idea that it's a Ponzi scheme is one I agree with 100%. It's
not real in the old-fashioned sense of the word. Of course people are
spending real money and there is real, speculation-inspired demand, but
I'll stand on my concept as originally proposed. It's people buying
something because they think other people will want it and the way our
marketplace is currently structured, this increases the price. It is a
house of cards that will come tumbling down at some point.

To me, it's no different than buying an overpriced house because you
think the it will be even more overpriced in sixe months and you'll do a
quick turnaround to make some money - that's a fundamentally different
thing than buying a house to live in, and also a fundamentally different
thing than buying a house you feel is underpriced and hoping to resell
it for a profit, if that house is underpriced in terms of its real value
to someone who could live in it. I couldn't sleep at night if I dealt
in speculative securities, commidities futures, and the like - it just
doesn't sit well with me to pay more for something than something is
really worth, and by "really worth" I mean its worth absent self-fulling
speculative increases in its price.

I repeat myself so I'll stop. All this is just my opinion, worth what
you paid for it here on Usenet. :)

-S-

Other than that, supply/demand has increased in the last few
decades, internationally speaking. IMO, not to the level of price
increase across the board. The low dollar certainly contributed to
the debacle. This applies to hard commodities also. There are a
number of conditions, prevalent for the last 6-8 years, contributing
to the overall pricing structures we see grading up at what seems
exponential levels. It is a long discussion, very boring. I would
spare you all cuz I likes you. The "war" didn't help matters neither.
I would make fun of the war efforts overseas, if it were not for the
loss of good boys and girls losing their lives. I'll leave it at that.

As for the expertise on the street, nada. These guys are greedy
morons as a whole. I became convinced of this in the dot-com era,
when multiples of 500 to 800 or more? were justified with "new"
economics coming from sub-30 year olds telling everyone that the new
business models need new revenue model justification. So please buy
Yahoo at a multiple of 750 when it was trading at $245 a share, or
JDSU at an 800 P/E. Please....

My conviction of the greed enhanced moronathon on Wall Street and
elsewhere was cemented firmly given the credit debacle, the "new"
mortgage market, the ultimate failure of Bear Stearns (co-signed BS
appropriately), and other housing failures.
A short story....I wanted to sell my extremely valuable house at
the height of the market. Let's put it up, get rid of it, we'll be
able to buy it back for 1/2 in 2 years. My wife gave me trouble.
Lots of it. I won't go into details. She called me a moron, I don't
know what I'm talking about, etc. Of course, I knew exactly what I
was talking about.
There were a number of clear signals. The most obvious was the new
structuring of mortgages that allowed someone with sub 100K in income
to afford a 500K or more house? No principal, just interest, balloon
payment at the end of the term, usually 5-10 years, maybe longer, and
no problem....your house will be worth double, triple, quadruple what
you paid for it now. Given the normalized inflation adjust cost of
homes, whether in the US or the UK for that matter, the market was WAY
ahead of itself. I mean way ahead. That was the other clear signal.
There were more....my wife was incensed. I let it go and took
advantage by other means. Of course, here we are 3 years later. My
wife doesn't question me. There were other things that happened that
told her it's best to let me handle it.

Bottom line...you can only use your own experience, observation
skills, memory and your own homework to tell you what to do, or what
not to do. Sometimes you make more money by putting your hands in your
pocket and doing nothing. It's cheaper to go play a round of golf
than trade what you don't understand. But, your common sense has to
tell you in that little voice, something's wrong, or something's
right. Emotions mean nothing. Your head and your gut tell you what
to do. Listen to that quiet little voice that you can barely hear
above the other noise in your head.

From a novel in progress..."Like the voice within that can never
speak loud enough, no matter how well we hear it, we *** our head to
listen closely, but it is fleeting, a whisper, and we are nothing but
forgetful".

Bestesses,

Rich
www.savageclassical.com







Maybe profit-taking. But the falling dollar doesn't help either.
Of course, just a rumor that the fed is going to signal that an
interest rate cut tomorrow is the last for a while was enough to
give the dollar a pop.

Steve

We are
apparently on a course to have the first _lowering_ of annual
demand in quite some time (15-20 years, if I remember correctly),
and there are no supply problems. As the analyst/expert pointed
out, you don't see anyone waiting in gas lines, do you? The price
apparently has to do with speculation about such things, but not
the things themselves, and indeed has become speculation about
speculation.

And of course the extra money goes to the oil companies not the
tax payers or the government.

McCain should have stopped when he said he didn't know much about
economics. Hillary should have stopped after her shots with a
chaser in Pennsylvania.

Richard Yates
Yes to the rest. :)

-S-




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