Sushi Money

Let’s see, durable goods are way up?  Could that be significant for employment going forward?  Hmmm… maybe that means we’re not really headed deep into recession, but just bouncing off the bottom a bit.  What else does that mean? 

Could the market be forming a base here?  All this government bailout stuff and an election year too (although why is one of our candidates campaigning in Europe?!).  Housing’s still way off from a bottom though, and banks are still tightening credit it seems.  But oil’s come down quite a bit the past couple of weeks, about $22 per barrel less than before.  Was that the top? 

The Treasury Secretary and FDIC folks see the current events as a “challenging environment” for consumers and financial firms.  No kidding.   But with all that money flowing out of the government, it’s got to go somewhere.  Eventually it’s going to make it’s way to consumers, and maybe show up in the way of inflation?  Which means the Fed may be raising rates over the next year.  Could be why mortgage rates have headed up too.

I don’t have a clue where the markets are headed, but I’m staying in the game.  There are some hopeful signs for economic growth and a continued recovery.  So how do I see it?  I’m focusing on safe places to put money and not taking any big risks.  But I’m not parking the money in the mattress either.  But safe is a relative term that means different things to different people.

If you’re 77 years old and have $65,000 of life savings, you want to feel that the money is safe in the bank savings account or a CD to use when you might need it.  And if you’re a young family, working hard to pay your bills and feed your children, it’s important to make sure that the $3500 you have in the savings account is safe.   And with almost every bank across the nation, that money is safe. That’s why they’re FDIC insured for up to $100,000 for most accounts.

But what’s the word safe mean to a family making over $100,000 a year, with three kids and one heading to college, and a modest 401(k) and retirement savings of $200,000?   Maybe that family is doing just fine at home and handling the economic challenges without any hardship on a monthly basis.  But are their investments and retirement savings in a safe place, especially when considered against a spectrum of 20-30 years?  Maybe not.

And that’s where a professional financial planner or advisor can help to structure your diversification and asset allocation based on what you believe is safe and appropriate to your age, your family situation and your financial goals.   Eventually the tide is going to turn, and you want to be ready to take advantage of positive economic change, while minimizing economic challenge.

What are the core values from my perspective?  Staying invested for the long term, staying patient, paying down debt and building up that emergency fund in the bank.  Not necessarily in that order!

I does feel good to save for a cushion in case we need it, and yes, there’s still many good places out there to park your money.   Folks are jumping at the chance to open a 4.0% CD with Bank of America while the company extends their business hours this weekend.  That’s not bad at all.  And there are other FDIC insured places to save such as with ING Direct’s High Yield Savings account offering a 3.00% annual percentage yield.

But here’s a question: Is the American Dream dead?  Is it too hard anymore to get an education, a decent paying job, find a home and raise a family?   Are there really hoards of “Empty ATM’s and Desperate Boomers” out there?

Maybe for some folks, but for the nation as a whole?  No way.  I don’t buy that for a minute, and I refuse to believe that the dream so many of us have for a better future has fallen by the wayside just because we’re facing economic challenge in many ways.   We’ve been through this before, and we’ll face it again.  But we’ll get through it.

No matter what I read, and all the negative hype about financial markets and the credit crisis, what the economy really is about is what we do at home.  If you’re the one struggling right now my thoughts and best wishes are with you.  But no matter what, don’t give up, keep the faith and stay hopeful.  This country has been through some pretty hard times in the past, and we’ll move forward from here just as well. 

* On a sad but inspirational note, Randy Pausch who gave us The Last Lecture has passed away today, July 25th, 2008.  I posted a Wall Street Journal video about Randy in September 2007.  He truly showed us what living is all about.  Here’s the link to his full 76 minute Last Lecture on YouTube.  And Randy’s personal site is worth visiting.  God Bless Randy, and to your family.

The dynamics we’re seeing in capital markets is astounding considering how confident we are of the economic fundamentals underlying the complex structures of finance throughout the world today.  And for all our knowledge and expertise, we have politicians, economists and business leaders grappling with the same questions over what to do next. 

And it’s amazing the difference a week makes in the price of oil.  Is it due to Senator McCain’s implication that President Bush’s lifting of the executive ban on oil drilling influenced world markets?   Or just weaker U.S. demand?  Here’s a thought:  Could it be related to hedge funds exiting long positions becasue of the SEC’s rule-making and investigative actions?  Or the Senate’s votes that may require the Commodoties Futures Trading Commission (CFTC) to implement oil trading rules for hedge funds and other large investors?

Can the SEC (or a few hedge funds) even influence a market so large and complex such as oil?  Possibly.  Based on initial data for example, the SEC’s recent rules stopping naked shorting of select financial firms has led to a 90% drop of shorting in key financial stocks.  Maybe it’s time to take profits in oil before the herd moves in that direction.

Many experts continue to argue about the SEC’s actions, but if naked shorting is technically illegal anyway, why does the SEC allow it in the broader markets?  Maybe the party is winding down for key hedge funds in securities markets, and many believe it’s about time.  The idea of equity firms profiting through naked shorting, or conducting bear raids on U.S. companies during challenging economic times doesn’t sit well with a lot of Americans.

And naked shorting doesn’t sit well with Cramer either.

It’s become common — even though it’s illegal — for traders to sell stock short without first locating shares for the transaction. This gives power players such as hedge funds virtual free reign to bring down a company’s share price.

“The regulators, frankly, are very naive about what really goes on,” Cramer said.

Cramer also criticized the SEC’s repeal of the uptick rule, which requires a trader to wait for an increase in a stock’s share price, an uptick, before he can sell it short. Cox said he only implemented the rule after rigorous analysis, but Cramer questioned the validity of that study.

“It was done during the greatest bull market in history,” Cramer said. “Perhaps we ought to reevaluate it in the greatest bear market in 25 years.”

This “laissez“faire” approach to regulation allows hedge funds to create “a level of fear that you can create a panic” because they can sell short and damage a stock with impunity. And it wasn’t until the near death of Fannie Mae and Freddie Mac that the Bush administration felt it necessary to step in.

While the SEC wrestles with market dynamics, the price of oil has continued to fall.  Whatever the reason for the oil price drop, it may not be that way for long.  Without expanded supplies for U.S. demand, the price of oil will be subject to shocks in the system in the form of hurricanes and other supply interruptions such as refinery outages  Even famed oilman T. Boone Pickens has said the price of oil may reach $300 per barrel within 10 years if the U.S. does not increase domestic oil production. 

“We have walked into a trap and we are the ones that put ourselves there,” he said. “I’m not pointing the finger at anybody because it isn’t going to help, but we have to work together to get out of it.”

The nation imports nearly 70% of its oil, Pickens said, spending $700 billion a year on those imports. Many of the countries supplying that oil are “not friendly” to the United States, he added.

“I am convinced that we are paying for both sides of the Iraqi war,” Pickens testified.

If the nation fails to adapt to the changing energy landscape the crisis will only worsen, he added.

“If we continue to drift the way we have been, you’re going to be importing 80% of your oil and it’s going to be $300 a barrel,” over the next 10 years, Pickens told [Senator] Lieberman.

 Yet Pickens sees increased oil production as only part of the plan, and advocates a greatly expanded alternative energy plan that involves wind farms throughout the country, especially in Texas and the southwest.

Wind energy can be used as a replacement for energy derived from natural gas, which is currently used for heating purposes, Pickens said.

The plight of the economy has become the defining issue for the election this year, and perhaps for a generation or more of middle class Americans. Not since the 1970’s, and some say 1930’s, have we seen such economic challenges.

But while the journey to economic growth may seem far off, some experts see opportunity in bear markets.  

…do not fall into despair. Bear markets last on average less than two years. The recovery is often very abrupt. This one will end, too.

If you have the money to buy, now is the time to buy the broad indexes (links associated with the top ETF for each index) – the S&P 500 (SPY), the Dow Jones Industrial Average (DIA), the MSCI Emerging Markets Index (EEM) and the MSCI EAFE Index (EFA) for developed foreign markets.

Don’t denude yourself of cash, but if you can spare it, buy now and in ten years you will be glad you did. The sun will come out tomorrow. It always does. And as the saying goes, “the darkest hour is just before dawn.”

Other experts advocate treading carefully with your nest egg, especially for those close to or living in retirement. 

While we undergo the gyrations of the markets from day-to-day, some think it’s time to challenge many of the beliefs we hold as economic realities.  Economists and legislators will certainly re-examine many of the economic ideas and practices that have been implemented in recent years. 

Regardless of the news, the reality is that we are adrift on this great economic ship, and we’re hoping we don’t become grounded for long before getting underway again.   

But how do we get underway again on the journey toward economic growth?  That is perhaps the central question that many of us will ask ourselves as we decide who is better positioned to lead the nation in the years ahead.

A dynamic week thus far with the market rallying off lows, and the SEC cracking down on short sellers in the financial sector.   Although markets may struggle today as tech bellwethers Microsoft, Google and IBM are giving analysts concern over the sector.  Technology shares have remained strong overall but Google is raising a few eyebrows with second quarter revenue jumping only 35% and paid clicks 19% compared to 20% a year ago.  Microsft’s profit leaped 42% but that may not be quite good enough as the earnings dipped below estimates as well.  And Citigroup posts a $2.5 billion loss but beats estimates? 

Meanwhile Al Gore is telling Congress not to let anyone drill for oil and that we need to shift faster to renewable energy, but T. Boone Pickens probably has a lot of better ideas Al.  Besides, why not do both?   While the energy debate heats up, the price of oil has been falling.  Is this the top for oil and energy?   Probably not. 

And all the world’s a stage this week as Senator Obama heads out on a “fact-finding trip” around the world to meet Middle Eastern and European leaders.  And the media is “going gaga” with three network anchors taking the trip with him.  Wow, with coverage like that who needs advertising?! But he will meet a host of world leaders and discuss many critical issues. 

The McCain camp calls it a political stunt… Politics? In an election year? Yep.  Interesting that McCain’s been to Iraq eight times and Afghanistan four times over the years, but Obama just once to Iraq in 2006, and never to Afghanistan.  And yet Obama’s media coverage will be non-stop, much to the consternation of the Republicans.  No time like the present however, especially with the Democratic convention next month?  If Obama wins the election, my guess is this trip will have been a pivotal event.  But you never know, sometimes people get the wrong idea.   With the New Yorker fiasco a lot of folks seem to think the Obama’s are off limits to satire.

But after the takeover of IndyMac Bank, many people are wondering if their investments and savings are safe.  If a leading national bank can become overextended, and then taken over by federal regulators in order to prevent a total collapse, what does that say about the other banks and institutions we use?  Can it happen with other banks?  Do we need to worry about our money?

The simple truth is that any bank, and any investment, can fail.  There are few guarantees in life, and getting a return on your money isn’t one of them.  Most banks however will be just fine.  We live in an amazing country regardless of the current economic challenges, and if we invest patiently and wisely, our money should grow over time.  If we put our money in reputable banking institutions, then we should feel secure in the knowledge that the money will be there when we need it.

Saving money is different than investing money however. Savings accounts are like emergency funds, and if you don’t have an emergency fund, then that’s priority #1.  The emergency fund should hold enough cash to fund 3-12 months of living expenses, depending upon your career and personal desires.  Most folks shoot for 3-6 months living expenses, and most Americans don’t even come close.  But it’s important as a safeguard for uplanned or emergency expenses, and in scary economic times, the emergency fund is one of the best things we can do to prepare.

By the way, to reiterate basic banking fundamentals, it’s important to remember that the FDIC only insures or guarantees banking funds for individual amounts normally up to $100,000. More may be insured if the account is joint, or meets other criteria. But as an individual, if you are keeping more than $100,000 in cash, CD’s or money market accounts within the same banking institution, then your money may not be protected in case your bank fails. 

What can you do?   Quite simply, move some of that money to a different bank, or several different banks.  Some folks don’t realize this.  You can have $300,000 for example, divided in $100,000 accounts at three different institutions, and all those accounts will be guaranteed and insured by the FDIC.  That’s a whole lot better than wondering if you’ll get your money back (in excess of $100,000) after the bank fails, as some with IndyMac Bank are doing.

Here’s a good look at the IndyMac Bank problems and a few questions and answers from Dave Ramsey:

If you have further questions about FDIC insurance and your account coverage status, take a look at the FDIC website. 

I’ve said it before, but investing means you don’t need the money for 3-5 years, preferably closer to 10 or beyond. You are investing the money for the future, not for a car you want to buy or a down payment for a house in 2 years. Of course the “patient” part of it is as difficult as the “wisely” part of it. It’s difficult enough to keep ourselves investing over time, but even harder to be successful by ourselves.

I’m a big believer in holding low-cost mutual funds over time, and putting together a diversified allocation of assets that will grow over decades.  If you can afford professional help, then get it. If not, then maximzie that 401(k) and IRA each year, and look at the options available within the plans. Don’t just stick with company stock.  Most companies do not limit the options you have within the 401(k) or retirement account, but sometimes you have to ask to learn more about your choices. For your IRA a solid company such as Vanguard can really help you manage retirement and investment accounts.

In other news it’s shocking, but not surprising, to read about U.S citizens hiding trillions of dollars in swiss bank accounts.  Holy cow, there’s some rich pickings for the IRS, and it looks like they’ve finally started enforcing the law.  And if you’re worried about where to get your next cup of Starbuck’s coffee, you can check out the list of store closings by state.  That’s an amazing about face for the flagship coffee company, and with competition from McDonalds and dozens of other coffee shop startups they’re probably trying to hold it all together.  Time to get another morning cup myself…

How much do you use air conditioning during the summer?  If you’re like most of us, that’s pretty strange question.  “Of course I use a/c during the summer?!  What do you think I am, nuts?”   And it’s true, having the a/c turned on is a simple fact of life for most of us, especially in the humid eastern and midwest parts of the nation.  On a recent trip to the arid west however, I found that nearly 100 degrees felt almost cooler than 90 degrees in a more humid region.  Yet even there, using air conditioning was something most people were accustomed to.

But using a/c everyday is still a luxury for much of the world, and especially for many of our older readers.  For those who work outside or live in the country, getting used to a little summer heat is not a big deal.  It’s one way to save money on electricity at home (besides yelling at the kids to turn out the lights!).

But with higher oil prices many people are cutting back on expenses and energy usage has taken on new meaning.   The Wall Street Journal has written about Pulling the Plug and Creative Energy Conservation this summer while describing various efforts people are making to save money while turning off, or reducing their air conditioning.

“Because many power plants run on natural gas, which has shot way up in price, utilities in every region of the nation have imposed — or are planning — big rate increases this year, some approaching 30%.”

“In response, nearly two-thirds of families are cutting back on air conditioning, according to a recent Associated Press-Yahoo News poll. They’re buying ceiling fans and programmable thermostats; burning up hot afternoons in malls and movie theaters; and bombarding blogger Erin Huffstetler, who writes about frugal living, with questions about the merits of tinting their windows dark to block the sun.”

Cutting back on a/c use can save a lot of money, but how do we define “cutting back?”  For some people, setting the indoor thermostat at 82 degreess is pretty warm, and I’ll agree with that especially when it’s humid.  For others however, it’s a “sacrifice” to set the thermostat at 74 degrees instead of 72.   Now I find that strange because 74 degrees is pretty darn cool, even for sleeping at night.  And 72 degrees?  Brrrr!   That would be like throwing money down the drain for me.

Realistically, a lot of us are just not used to the heat as we were in the past.  I grew up with a/c in the house, but not in the car.  I drove my first car for 100,000 miles around the midwest without a/c.  Of course I didn’t know any better… would I do it today?  Not a chance.  But I have a relative who keeps her house thermostat around 82, and it feels pretty warm inside.  Is anything wrong with that?  Not a thing.  More power to her, and what’s wrong with a little sweat?  The savings at 80+ degrees are significant when not using the air conditioner.  She keeps a few doors and windows open for the breeze, and enjoys saving money. 

But make sure that what you are doing is actually saving money.  In the WSJ article’s example, one woman thought she was saving money by only using window air conditioners and keeping it warmer inside.  Turns out she was using more energy than the previous year because her air conditioners were so inefficient. 

Of course if you have nowhere else to go it can become somewhat overpowering to keep the house so warm.  Many folks have a basement below their home and can find a shelter at temperatures close to 70 degrees. Of course many people also enjoy their employer’s air conditioning while at work, and return home to warmer temperatures.

 But there are ways to save a lot more money.

“Replacing a standard air conditioner set at 72 degrees with an energy-efficient model set at 78 can cut your cooling costs in half, though savings vary by climate, according to Xcel Energy Inc., a regional utility based in Minneapolis. A programmable thermostat can save as much as 12%. A ceiling fan can lower a room’s temperature by several degrees. Even something as simple as switching to compact fluorescent light bulbs can make a big difference in electricity bills.”

I can vouch for using compact fluorescent bulbs.  We’ve cut almost $10 off our monthly electricity bill by fitting the entire house with them.  And a thermostat?  Absolutely essential.  That has been the single greatest energy saving device we own.  I’ve written before of seeing neighbors using an old fashioned dial thermostat, and manually changing the temperatures each day.  The problem was they weren’t around most of the time and their a/c or furnace just ran and ran while they were gone.   What a waste of money!   A good programmable thermostat can automatically regulate your home environment, and save a bundle of money over time.

And yes, the biggest thing we can do to save money is simply to not use as much energy, or air conditioning.  What else do we do?  Not much yet.  I’d love to find out more ways to cut back on energy usage.  Between the dishwasher, dryer, air conditioner and other electric systems, I’d say we have a lot of room for improvement.  What do you do to save money? 

We’re off to a slow start this summer:  I paid a gent over $200 to fix our air conditioner yesterday. Ugh. We’re in the hole before even using the darn thing! The cost of freon on an older a/c unit is getting very expensive.  Tried to get by without the a/c the last few weeks, but decided to fix the system instead.  Do we use it all the time?  No. But it sure is nice to have when needed.

In a historic, if not desperate move, President Bush finally lifted the executive ban on offshore oil drilling.  What took him so long?  For almost eight long years we have heard the Republicans talk about an energy plan, but they couldn’t put a package together even when they had the majority.  Which in itself is somewhat amazing.

But President Bush finally recognized that Congress was too politically afraid to do anything except blame the oil companies, and each other.   Will anything happen now?  Will the Democrats in control of Congress be forced to hold hearings and consider changing the law?  Maybe.  But they can stall for a long, long time.

“The only thing standing between the American people and these vast oil resources is action from the U.S. Congress,” Bush said in a statement in the Rose Garden. “Now the ball is squarely in Congress’ court.”

“For years, my administration has been calling on Congress to expand domestic oil production,” Bush said. “Unfortunately, Democrats on Capitol Hill have rejected virtually every proposal. And now Americans are paying at the pump.”

Congress must now change the law in order for oil companies and U.S. states to explore off the coasts of the nation.  Even if that happened tomorrow most people recognize that we are years away from increasing oil production in the U.S. 

But those are precious years indeed.  Between alternative energy sources, better mileage vehicles, reduced driving by consumers, and greater oil supplies over time, we just may see prices come down.   Will we ever see the lower prices of a few yeas ago?  Doubtful.  But even if the price of oil fell by a third, we could see pump prices close to a dollar lower.

For now President Bush’s actions are welcome if for no other reason than someone in a leadership position is doing something.   We’ve called for an Energy Summit before, and maybe this is the first step on that path.

Is it possible for a politician to help cause a bank failure?  That would not be good, for the economy or the bank obviously.  More importantly for the bank’s customers.  But it looks like Senator Charles Schumer did just that.  And can the SEC stem the tide of rumors on Wall Street?   Much more than just rumors with the Fannie Mae and Freddie Mac news this week but both companies are receiving full support from U.S. government agencies.

In the locked partisan battles of Washington D.C. the ground rules seem to be ”blame the other guy first.” Like many politicians, Senator Schumer, a Democrat, is known for targeting blame for all kinds of issues with the current Republican administration. 

Apparently with a letter published June 26th, he raised substantial concerns about Indy-Mac bank’s solvency that subsequently led to depositors withdrawing billions of dollars, shutting off liquidity and forcing U.S. government regulators to take over the bank. 

 ”…a letter he sent to the Office of Thrift Supervision and the Federal Deposit Insurance Corp., saying he was “concerned that IndyMac’s financial deterioration poses significant risks to both taxpayers and borrowers.”

Schumer™s decision to go public with those comments triggered a firestorm in Washington. Regulators on July 2 said he was contributing to “rumors and innuendo” about the bank that could hasten its demise.

On Friday, regulators specifically fingered Schumer for IndyMac™s failure. The Office of Thrift Supervision said in its statement announcing the seizure that “the immediate cause of the closing was a deposit run that began and continued” after Schumer went public with his concerns.

“This institution failed due to a liquidity crisis,” OTS Director John Reich said Friday. “Although this institution was already in distress, I am troubled by any interference in the regulatory process,” a reference to Schumer.

 In my view it’s a shame that any politician would make political hay out of economic issues while specifically targeting a banking institution, and forcing a response by both regulators and concerned customers.   If Senator Schumer was really concerned, he might have met with regulators to see what he could do to help. 

Naturally Senator Schumer doesn’t see it that way. 

œThe regulator here was asleep at the switch, Schumer said. œThe administration is doing what they always do, blaming the fire on the person who called 9-1-1.

Really?  It’s a Senator’s job to “call 911″ and say the bank isn’t sound,  and instill such public fear that money is withdrawn to the tune of billions of dollars?   You would think a Senator’s job would be better spent working with regulators instead of making their job harder. 

Instead, Senator Schumer simply pointed fingers, as usual, calling attention to challenges and instilling fear across the nation.  Hmmm… What’s next on the list?   Undermining the U.S. Treasury?  Now that taxpayers will spend between $4 and $8 billion dollars to back up Indy-Mac bank, you’ve got to wonder how a politician could make such a mistake.  Perhaps some politicians are so used to blowing their own horn and blaming the other guy that they forget there are real people behind the fingers they point. 

In some ways it’s like rumor-mongering to find political advantage.  Now wait a minute.  Isn’t that how rumors spread and lead to stock price manipulation?   The SEC just opened up a new investigation into rumors being spread in financial markets. 

SEC Chairman Christopher Cox said the investigation is aimed at “ensuring investors continue to get reliable, accurate information about public companies in the marketplace.”

Cox said the probe will provide an opportunity to make sure brokers and investment advisers have “appropriate training for their employees and sturdy controls in place to prevent intentionally false information from harming investors.”

The probe is separate from SEC’s investigations, already under way, into alleged intentional manipulation of securities prices through “rumor-mongering and abusive short selling,” the agency said in a statement.

Looks like Senator Schumer could use a sit down with Treasury regulators.  But what he did was not just spreading rumors.  Whether accurate or not, he basically told anyone who would listen that Indy-Mac bank was in big trouble and they better get their money out while they could. 

A look at the IndyMac Bank website is a cold reminder about what happens when a bank fails.  Our thoughts are not only with the customers but also the countless employees who worked for the bank.   More specific information for IndyMac Bank closing can be found at the FDIC website.  The bank opens this week with a new name:  IndyMac Federal Bank.

If a bank run is not enough, Fannie Mae and Freddie Mac are both in the hot seat this week. The Federal Reserve and the Treasury have both made supportive statements to calm investors, increasing credit and possibly even buying equity in one or both companies.  The U.S. government will stand behind these mortgage giants, but it’s not a pretty situation.  

Don’t know where we’re going this week, but recent news has changed the short term dramatically.   Regulators are supporting financial institutions, but are still playing catch-up to current market dynamics.  Huge hurdles for the financial services sector ahead and with the DOW falling below 11,000 last week the market has some tough work ahead.

Jim Cramer has a TV special tonight called The American Dream and it sounds pretty interesting.  Here’s a guy who made his fortune on Wall Street and has since become an engaging media personality.  Most people either love him or hate him, but he’s been gaining a wide audience with the wildly successful Mad Money show.

He definitely makes bold statements at times, but he calls it like he sees it.  And sometimes he’s even right!  But his conviction and focus are engaging, and many appreciate his unique take on the market and specific stocks and sectors. I appreciate that he sees things in a way we might not consider otherwise. 

Tonight he’s supposed to focus on getting back to basics and learning how put your money to good use.  From a pragmatic standpoint he says “We’re going to teach people how not to be poor, before we teach them how to be rich.”  Not a bad idea, especially if financial literacy is a core theme.

But The American Dream should appeal to the masses with its debut at NASCAR racetrack Lowe™s Motor Speedway in Charlotte, N.C.  The show airs at 7 pm eastern tonight.  What do you bet that NBC is pushing for a weekly series?

Lots of thoughts out there on the Bear market we’ve entered.  Historically bear markets last about 14 months and see 25% to 30% declines from the previous top.  But maybe this all started around October 2007?  We’ve danced around a 20% decline for a while now, but will it go further?  And does that mean we’re going to see 14 months of dwindling stock indexes from here?  Maybe.  But maybe we’ve only got about 6 months left to go on that historical average and next year, post U.S. election, everybody wants to turn this economy around.

Some folks think the oil futures markets have been manipulated, and that others have jumped on the speculation bandwagon to produce unsustainable returns.  Maybe in other commodity markets too.   And just maybe this is one giant bulge of excess that’s about to deflate.  

What happens to that excess of money? It has to go somewhere.  Maybe it’s like a sector rotation, and that money will have to be put somewhere else in bargain priced assets.  Could stocks be the beneficiary of all that money?  Maybe.

We’re starting to see a mass of negative public opinion concerning the inflationary storms affecting the global economy.  And folks also think becoming energy independent is not such a bad idea after all, even if it does involve a little drilling.  The politicians have to do something of course, usually to excess, that influences current market dynamics.  And eventually, the oil bubble is going to pop. 

Sure we’re going to see higher oil prices in the years ahead, but right now the oil markets are out of balance.  Once excess speculation is reigned in and oil producers have greater access to supplies, oil prices will fall.  How much?  Who knows, but at some point we’ll be closer to an equilibrium reflecting a more realistic supply and demand situation. 

And maybe the dollar gets a lot stronger over time.  Maybe the U.S. or some other country intervenes in currency trading in a big way.  Maybe the U.S. backs new exploration and drilling or refinery operations.  Maybe we help automakers shift to alternative energy vehicles faster than expected.  Maybe there’s just too much oil out there waiting in the wings anyway.  

And maybe equity markets, piled high with enormous short positions, will rally.   Maybe.  But hey, it’s all just pure speculation.  If it does happen?  There’s going to be some huge moves in a short timeframe.  Maybe both ways.  But when this beast turns around you don’t want to miss out.

When was the last time you reviewed your employee benefit situation?   Most of us fill out tons of paperwork when we start a new job, and then we don’t think much about our overall benefits unless we use them.

But do you know if you’re qualified to receive life insurance?  Have you designated beneficiaries where necessary?  Do you even know who the benefits personnel are with your employer?   And if you do know a lot about your benefits, when was the last time you reviewed them?

Sometimes it’s not what we do that matters, but what our employer does.  Sometimes you can do everything right, and still end up without promised benefits simply because your employer has the law on their side.

Here’s a story from the AP about Spherion Corporation that denied $426,000 of benefits to the spouse of an employee who died simply because he didn’t fulfill one day of employment under a new insurance policy, that he didn’t even know he was required to do. 

“Spherion’s decision to deny benefits to Amschwand-Bellinger turned on an odd set of facts. Spherion, which employs about 300,000 people, switched insurers after Thomas Amschwand was diagnosed with a rare form of heart cancer. The new policy did not take effect until an employee worked one full day. Spherion never informed Amschwand of the requirement.”

“Amschwand asked repeatedly whether there was anything else he needed to do and was told no. He asked that the new policy be sent to him. Spherion never did so.”

“He died without returning to work. His widow said he easily could have worked a day if that was what it took to activate the new policy. Spherion could have waived the one-day-of-work provision, as it did for other employees but not for Amschwand.”

Incredibly, even though his widow sued the company, she lost under current legal guidelines.  

 **Update:  Spherion Corporation has provided some additional information about this case.  For further information, click here to read about the Amschwand case on the Spherion website.  Only the family and Spherion really know the details, but in fairness we wanted to ensure all available information was provided.

Employee benefits issues will certainly become more important in the years ahead, especially with an aging workforce.

Along those lines,  the Supreme Court has come down on the side of employee rights in several workplace discrimination cases recently.  Arguably some employers see this as another expanding threat of increasing costs and bureaucratic mandates.  Yet for older workers, discrimation within the workplace can be a real concern, especially coupled with the dual impact of health care benefit needs and retirement planning needs.  Employers are now on notice to ensure they are not denying benefits or job advancement opportunties to older workers due to discrimination, or basically “firing” an older worker simply because of the potential cost of health or retirement plan benefits.

Most importantly however, it’s up to individual employees – young or old – to make sure they know and are receiving benefit information, and that they’ve signed and completed paperwork or other requirements for the benefits to be valid.

Understanding and implementing benefit programs for employees shouldn’t be this difficult.  For many companies it’s not, and the company works together with employees to help them understand their benefits.  But like much in our financial lives, it pays to be prepared.  

Take another look at your benefit programs and make sure you understand the rights (and responsibilities) you have in making sure you receive the benefits you are entitled to when necessary. 

For more information, see your Human Resources or Benefits Personnel office, or check out a few helpful links at the U.S. Department of Labor:

• Health Care Plan benefit information
• Retirement and Pension Plan information
• Retirement Savings issues
• Consumer Publications available

So let me get this straight.   Officials around the world and within the U.S. say oil prices are at record highs because of the fundamentals of supply and demand.  We don’t have enough supply, and there’s too much demand. And speculation is not to blame.

And yet the great oil debate continues with many of the oil producing nations saying they don’t intend to increase supply because there is not enough demand and the market doesn’t warrant it.  Instead they blame excessive speculation as the real problem.

OPEC’s Secretary General Abdullah al-Badri called for measures to curb market speculation, a factor the Organization for the Petroleum Exporting Countries has said is driving prices to unjustified levels.

“We are not happy with the current level of price for one reason. It has nothing to do with the fundamentals,” he told the Reuters Global Energy Summit on June 10.

Saudi Arabia’s oil minister Ali al-Naimi says: “I am convinced that the supply and demand balances and crude oil production levels are not the primary drivers of the current market situation and that markets are already well-supplied.” (At the Jeddah Energy Meeting in June.)

He also says, “Supply is enough. The price is driven by many, many causes — most of which is speculation.” (At the World Petroleum Congress in Madrid June 30)

But others disagree, and even commodity experts within the U.S. argue over the Hunt for Oil Villians with many believing that speculation and futures contracts play little role in price increases. 

But then there’s the oil companies. Oil executives also think it’s a supply and demand issue.  The oil companies cite the lack of new supplies, and not speculators, as the reason for high oil prices.

Tony Hayward, chief executive of BP said the argument that financial investors buying oil futures were behind oil’s record levels was a myth.   “Supply is not responding adequately to rising demand,” he said at the World Petroleum Congress in Madrid.

At the same conference, Shell chief executive Jeroen van der Veer said “We don’t think that the financial markets are leading the speculation, probably they follow what other people fear as long-term fundamentals; I do not think that you can blame speculation for the oil price.”

Sounds like the U.S. is being squeezed from all corners and no one knows what the heck is going on.  And yet here we are with oil over $140 per barrel.  

Meanwhile the U.S. Congrees is scrambling to do something, anything, to placate voters.  And instead of blaming oil companies as they’ve done for decades, they’re finally looking for solutions.  Apparently they’ll do anything to prevent increased drilling, so Congress is trying to reign in speculation with at least nine proposed bills.

And this is not just a U.S. issue of course.  Officials in the UK are now trying to determine what’s to blame for high oil prices.  And think of the effect on poorer nations, and those living in poverty?  It’s a harsh reality, but the number of people suffering and dying from hunger is only increasing as fuel prices influence global economics.

Senator John McCain is now pushing for Energy Security and an expansion of domestic oil production.  Personally I think it’s about time.  It’s a valid point: In 1969 we sent astronauts to walk on the moon, yet in 2008 we are bankrupting our economy because we have not planned ahead for energy independence. 

The U.S. has not increased domestic U.S. oil production capacity in over 30 years, and instead we have placed ourselves in economic servitude to hundreds of foreign oil producers.   The last U.S. oil refinery was built and began operating in 1976, and for many years since refineries have operated near 90-100% of capacity.  Yet in over three decades, no new refineries have been built due to the burden of environmental and political regulation. 

And the U.S. is the only country in the world in which oil companies have been legally prevented from drilling for new oil reserves in order to produce enough gasoline and diesel fuel to supply our needs.  

If the Global War on Terrorism is about protecting America and other free nations at home, then we should be willing to do whatever it takes to bring down oil prices.  Our national security is not solely affected by terrorists abroad who wish to do us harm.  National security is also about economic viability. People are afraid of being able to sustain themselves and their families over the long term.

In the name of environmental activism and global warming mania, the U.S. and other nations have seemingly become bent on a course of economic self-destruction that harms not only U.S. families and individuals, but possibly has led to increased hunger and starvation of millions of humans across the world due to biofuel emphasis such as ethanol production.

œIt™s very hard to imagine how we can see the world growing enough crops to produce renewable energy and at the same time meet the enormous demand for food, says Professor John Beddington, the UK’s Chief Science Advisor at a sustainability conference in March 2007.   œThe supply of food really isn™t keeping up.

“By 2030″, he said, “the world population would have increased to such an extent that a 50 per cent increase in food production would be needed.” By 2080 it would need to double. But the rush to biofuels “ allegedly environmentally friendly “ meant that increasing amounts of arable land had been given over to fuel rather than food.

It’s a delicate balance.  U.S. environmental regulations are a good thing in general.  We appreciate and need clean air, water, forests and resource diversity. But taken to the extreme, we can tie our hands economically and end up hurting real people and the ability to grow the economy. I’m all about conservation and stewardship of natural resources. But people must come first in terms of the decisions for how we balance resource use. I don’t believe it is mutually exclusive- I think we can both protect the environment and balance resource use such as drilling for oil in ways that are environmentally responsible.

Business and consumer confidence are in my view the preeminent factors influencing economic strength going forward.  Whatever we do in regard to high oil prices must be framed in the context of assisting consumers and companies with improving their economic fortunes. 

If we have learned nothing over the last century it should be that a rising tide does indeed lift most, if not all, boats.  But at present, as the tide continues to recede this year we are seeing many boats in the name of job cuts, bankruptcies and foreclosures, left on the beach of the dwindling U.S. economy.

While Congress, economists and other experts are trying to figure out “who’s on first” we just need to roll up our sleeves and get busy becoming energy independent. 

Abbott and Costello were funny decades ago, and will still be funny many years from now. High oil prices are not very funny to most Americans and neither is watching the great oil debate in the media. But just maybe we’re finally recognizing that we need to do something different, and that’s a start.

For the record I agree strongly with Thomas Madden: America’s Days Aren’t Numbered. On this 4th of July we have much to be thankful for, and much to look forward to.