Re: Tax refund checks - marked as OT

Steve Freides wrote:
"Richard F. Sayage" <rsayage1@xxxxxxxxxxxxxxxxxxxxxxxxxxx> wrote in message news:481897f3$0$11603$607ed4bc@xxxxxxxxx
"Steven Bornfeld" <dentaltwinmung@xxxxxxxxxxxxx> wrote in message news:_uednZOut6XC5IXVnZ2dnUVZ_gmdnZ2d@xxxxxxxxxxxxxxxx
Steve Freides wrote:
"Steven Bornfeld" <dentaltwinmung@xxxxxxxxxxxxx> wrote in message news:_sGdndff0LjDQ4rVnZ2dnUVZ_t3inZ2d@xxxxxxxxxxxxxxxx
Steve Freides wrote:
"Richard Yates" <rayates53@xxxxxxxxxxx> wrote in message news:A7GdnV2eY_8iVYrVnZ2dnUVZ_jKdnZ2d@xxxxxxxxxxxxxx
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-



No doubt, Steve, regarding speculation. But it is not the whole story.

All prices are subject to wild speculation, wild booms, and precipitous drops. The oil market as well. But there are some key differences. Unless you've been to industrial China, one may not have a true idea of how severe demand is in the area. To put the numbers into perspective, they have 500 million "middle class" citizens. A number that is growing rapidly, year over year. How many citizens do we have in the US combined? They drive, work, and their manufacturing facilities are craving more supply. They shut the lights down at night to conserve what they consider "precious" energy.
India is another growth center. Similar numbers percentage wise.
There are other areas outside of the US.

Should the price be this high? Probably not.
Is it due to some weird out of whack speculative property regarding the market-place and its participants? Probably, to some degree.
War in Iraq? Probably, to some greater degree.

But we should not underestimate the great demand out there.

There is demand, a lot of it. In this country alone, due to the great powers that be running our Big 3 autos, who didn't seem to learn a gotdam thing from their debacle of the 70's, they went right the *** out and started building bigger and badder trucks, SUVs, mini-vans that get *** mileage, and other monsters.
The entire North side of the country uses heating oil, natural gas, propane and whatever else, 70% of the year. Homes built in the last 10 years are well over 3000 sq. ft. with huge ceilings and little thought given to energy conservation. (these are rough numbers mind you).

Inflation-adjusted costs to produce, find, and mine energy sources are about where they've always been. The profits built in because of the huge price spikes are what allow XOM and BP and others to amass huge profits. They had many lean years. They've finally come in to their own. We all suffer. Such is life.

Rich


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-




--
Kind Regards,

Richard F. Sayage
Savage Classical Guitar
Bay Shore, NY 11706

www.savageclassicalguitar.com
www.savageclassical.com
.