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Investment Research for Online Investors

by John Dalt

02/18/09

The IEA report comes out tomorrow because of Presidents Day on Monday.  A few interesting statistics I saw today.  World oil consumption in 2008 averaged 86 million barrels per day.  The agency estimates first quarter 2009 use averaging 72 million barrels, due to the world economic slowdown.  Venezuela’s output peaked in 1998 and has declined 25% since, Mexico’s production fell 9% last year to a 14 year low.  Chinese oil demand has increased 90% in the last 10 years.  The oil market was down again today, waiting for consumption to increase with the world recovery that is inevitable.  Why is it that simple supply and demand is ok as long as no one is making any money?

Herbert Hoover authorized spending by the federal government in November 1929 for public works projects.  Among the projects built were the Hoover Dam, San Francisco’s Bay Bridge, and the Los Angeles Aqueduct.  The Hoover Dam had been in the planning since 1922  Construction on it began in 1932 and was completed in 1936.  The Federal budget in 1929 was $3.127 billion, with a surplus of $734 million.  In 1940, after eight years of FDR’s ‘New Deal’ the Federal budget was $9.468 billion, with the top tax rate raised from 25% to 80%.  Inheritance, corporate, and excise taxes were all increased as well.  Gold was $32 per ounce, except FDR made it illegal for individuals to own gold.

“Those that cannot remember the past are condemned to repeat it.” 

                                                George Santayana 

                                                “The Life of Reason” 

Did you know that four of the five largest contributors to Barney Frank’s 2008 election campaign were finance companies? He is Chairman of the House Financial Services Committee. In the Senate, Citi is the largest contributor to Chris Dodd, Chairman of the Senate Banking Committee. It is amazing that these capitalists would give money to the guys that hold the guillotine over their head, or is it? I fired off an email to the Chamber of Commerce last week when they endorsed OH! Bama’s porkulus plan, capitalists are drawn to socialists like moths to a candle that will destroy them.

The markets are trying to digest Washington’s interference in the markets.  Everything coming out of Washington makes toxic assets harder to price.  For example, how do you price a current $200,000 home loan that is paying 6.5% interest?  What if the ‘Housing Stabilization Policy’ says you have to lower the interest rate to 4% so the borrower’s payment is only 31% of income?  What if the ‘New New Five Year Plan’ says that courts can adjust the amount of principal because the house is now only worth $150,000?  We are heading towards an Armageddon where even good mortgages will not be worth anything because of changing government decree.  Who is going to loan money, or sign any contract if the government can change the game while the players are still on the field?  Forty years ago, I remember the funny ‘Five year plans’ that the Soviet Union would issue every two or three years predicting fantastic farm yields, increased steel production, four million new jobs, and all such nonsense.  It is not so funny when our government does it.  Gold, Silver, interest rates were about the only things up today, as the Dow and SP500 treaded water.  We picked up Berkshire Hathaway in the long term Portfolio today.  It was my recommendation at a specific buy price almost three weeks ago.  That is how we make money, identify great companies at a reasonable price, then buy when others value them less than we do.  You can join us now, read more here.

A trillion here, a trillion there, a trillion everywhere!

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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