Archive for September, 2005

How bad is it?

Wednesday, September 28th, 2005

Consumer confidence index dropped even more than analysts expected and is the lowest it has been in two years. It dropped 18.9 points in September for a reading of 86.6, down from 105.5. Economists were expecting a reading of 98. The drop was the largest fall from month to month in 15 years.

Investors began selling, but Greenspan calmed investors by emphasizing “the incredible resilience of the U.S. economy in terms of flexibility”. Greenspan stated that before policy-makers respond to disasters, markets react through prices, interest rates and exchange rates, which work together to cushion the economy.

I am pleasantly surprised that Greenspan’s words insoired so much confidence considering the huge fall in consumer confidence and the importance of domestic spending to the US economy. I’m not conviced that the confidence Greenspan inspired today will keep markets from declining in the next several days, however. We shall see…

Rita and Oil

Saturday, September 24th, 2005

Globeandmail writes that Rita is likely to impact oil and gas prices:

By late yesterday, the U.S. government reported that virtually all oil and gas production in the Gulf of Mexico was shut down, while 15 refineries in Texas were also closed.

“It has the potential to significantly disrupt an already fragile energy industry,” Mr. Zandi said. With four refineries still out of commission in New Orleans, any further shutdowns would drive gasoline pump prices to new record levels, resulting in higher inflation and further erosion of consumer confidence.

Still, investors were happy to hear forecasts that predict Rita will not hit Houston directly:

Investors took some relief from Rita’s shift in course and reduction in wind speed. On the New York Mercantile Exchange, crude oil futures fell nearly $2.31 to $64.19 (U.S.) a barrel, while gasoline futures fell 5.38 cents to $2.0856 a gallon.

Home Saunas Increase Your House Value

Thursday, September 22nd, 2005

A guest article that encourages homeowners to add a sauna to increase the value of their homes and improve their health. Considering the importance of staying physically healthy in order to have healthy finances, I decided it was worth publishing. I hope you agree.

Any homeowner knows what a huge investment in time and money owning a home is. While most people buy a home with little thought to eventually selling it, a new homeowner should keep in mind that this investment can be more than just an expenditure of money, it can literally be an investment in your family

Oil prices and car stocks

Sunday, September 18th, 2005

While crude oil futures dropped $US1.70 to $US63.05 per barrel, Deutsche Bank raised its rating on Dow-component Exxon Mobil to “buy” from “hold,” saying oil supplies are likely to remain tight over the coming year.

I see no reason to dispute this. It seems like the 40.00/barrel days are long gone and one wonders if we’ll ever see 50.00/barrel again. 60.00? Perhaps.

To me this means not only that oil companies will benfit but so will companies like Toyota which is leading the pack in terms of hybrid technology and Honda which has high quality fuel efficient automobiles. I ahven’t looked at the financials of either comany yet, but I plan to do some research because their products are well positioned.

Can the Fed raise rates?

Sunday, September 18th, 2005

Many investors are predicting that the Fed will not raise rates because of Katrina and it effect slowing the US economy. However most economists predict that the Fed will increase its benchmark borrowing rate by a 0.25 percentage point.

This is supported by the US benchmark gold futures, which are up to a 17-year high of $US463.30 an ounce. If for some reason the Fed did leave rates where they are, I think the market would react very favorably but this scenario seems unlikely.

Tough to invest in airlines

Tuesday, September 13th, 2005

I wrote last year about why investing directly in airline stocks is risky; they have no control over two very important factors – oil and terrorism. We’re reminded of this today:

The International Air Transport Association joined angry motoring organisations yesterday in a scathing attack on oil refiners for almost tripling margins on jet fuel from $US6 in 2003 to $US17 now.

Many airlines are reducing profit forecasts and the airlines that are already losong money (the big US airlines) are set to lose even more. I’ve been avoiding airline stocks for a long time now…

Oil declines

Tuesday, September 6th, 2005

Oil prices declined slightly as the Wall Street Journal explains:

The impact of the refinery outages may be muted by the International Energy Agency, which Friday agreed to release two million barrels a day of crude oil, gasoline and other fuels to the world market from member nations’ strategic stockpiles over 30 days. That is equal to about 2.4% of daily world consumption. In response, gasoline futures fell nearly 23 cents in New York trading on Friday to settle at $2.18 a gallon.

They also note that producers and refiners are seeing higher profit margins: “Credit Suisse First Boston raised its estimate for third-quarter U.S. Gulf refining margins — the gross profit margin earned from refining oil into gasoline and other products — by 67%, to $15 a barrel from $9 barrel.” This is attracting the attention of some politicians: “The governors of five U.S. states issued a letter requesting that President Bush prevent oil companies from profiting at the public’s expense. Congress, too, is pressing the matter with hearings on gasoline supplies and other Gulf-related energy measures this week.”

There’s very little chance of the politicians getting anything done quicly so I imagine that producers and refiners will continue to see strong profits.

Health insurance and saving plans

Saturday, September 3rd, 2005

Tax free health savings accounts in America sound like a good idea – you need money put aside in case you or a loved one becomes ill. These tax-free accounts, which must be coupled with high-deductible health insurance policies, are now held by about 1 million Americans. Money in the accounts can be used to pay for medical expenses today or saved to cover medical expenses in retirement. By next year, the accounts are expected to be offered in almost every state and by 25% of big employers.

However there are issues, primarily with the higher deductible:

Health insurers are among those who say that educating Americans to be better consumers of health care will help control costs. Such efforts focus largely on allowing tax-free health savings accounts to be coupled with high-deductible policies. By paying more, the theory goes, workers will use health care more judiciously. Such plans come with at least a $1,000 annual deductible for individuals and $2,000 for families, meaning patients must themselves pay for care until reaching those limits.

A growing percentage of employers say they will consider them, but health savings accounts remain less popular than insurance with smaller deductibles. The USA TODAY/Kaiser/Harvard poll found that 61% of people who have insurance through their jobs would rather pay $50 to $100 a month more to keep their current coverage than switch to a high-deductible policy.

Critics of health savings accounts say they won’t really save much money and could mean that people, especially those with chronic illnesses, will put off needed medical care. The USA TODAY/Kaiser/Harvard poll found that households where someone had a chronic illness are far more likely to report being unable to pay a medical bill in the past year than those without.

(quotes from USA Today).

Advice for investing in real estate

Saturday, September 3rd, 2005

This article from HeraldNet has some basic advice about what to expect when getting involved in realestate. It begins with the time investment required and moves on to the types of properties you should be looking at:

I believe in investing in real estate to make money. That means you should have a positive cash flow, or at least break even, before taxes. Don’t count on tax write-offs to bail you out, and remember that tax laws can change.

If you have the money, your next step is to find a deal that makes sense. That’s often the toughest challenge. Don’t walk into your local real estate office and pay the retail price for a nice clean home, because you will not be able to achieve a positive cash flow unless you make an enormous down payment.

Ideally, you want to search out a house that is in poor condition but is in a good location. However, this is extremely difficult in today’s hot housing market.

Real Estate in New Orleans

Saturday, September 3rd, 2005

With some estimating that a large percentage of the 200,000 homes in New Orleans will become tear down candidates, it will be years before housing supply is back to normal. This decreased supply may lead to increased prices and increased competition for available units.

It is also possible that clean up companies will do well short term (the next year or three), while homebuilders in the area do well once the rebuilding begins. Having been to New Orleans, I can say that we’re talking about an amazing city – I wouldn’t move away if it were my home and the people have a great spirit. It will take time, but I believe the city will be rebuilt.