"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey
You know the daily drill by now. Energy prices have come down, but they're still too high. The government still has done nothing to help the credit crisis. Consumers are hurting. Corporate earnings are declining. Israeli and Muslim issues continue to demand our undivided attention, and the list goes on and on.
Later this summer, and maybe into the fall, we may get the final washout in the stock market which can provide the necessary springboard for a new bull market. The first step in doing so will be a change in the accounting laws that demands that holders of mortgage to price those assets at their current market values. Since there is no market for these assets, banks are forced to write these down, and in turn are seeking new capital. Why something hasn't been done already is beyond my comprehension.
The housing problem has been well advertised, but no one is taking into account that approximately a third of homeowners don't have a mortgage, and the majority of consumers that were issued mortgages have them locked in at fixed-rates.
Clearly, energy prices have been manipulated, and speculators have gotten away with murder. The Cheney administration has done nothing to help the situation. And why should they, they are oil people.
Today, I received an e-mail from the airlines in which they said;
Speculators in these markets are increasingly buying and selling commodities such as oil to sell again, rather than to use. As largely unregulated speculators pocket billions of dollars at your expense, the price of commodities has increased out of proportion to marketplace demands.
As speculators continue to dominate the market, the volume of oil traded “on paper” has been as high as 22 times greater than the volume of oil consumed. As prices rise, institutional investors have become active traders, turning commodities into just another asset class. This has caused severe market imbalance and upset the natural relationship between supply and demand. As a result, legitimate customers such as trucking companies, airlines, and consumers have been forced to purchase oil at unnecessarily higher prices. This has dramatically raised costs, resulting in needlessly high prices for American consumers and businesses.
Over the last 20 years, commodities markets have become increasingly less regulated. Today, as many as 90 percent of all commodities trades occur outside of the traditional marketplace exchanges. In these so-called “Swaps trades”, parties secretly buy and sell commodities with absolutely no one watching. This means speculators can manipulate oil prices and corner the market without anyone knowing.
As oil prices were reaching new highs, the executive branch of our government has done nothing to curb the immoral trading in energy. In fact, they have helped the price of oil rise by using tax dollars to purchase oil for the nations Strategic Petroleum Reserves (SPR).
Nothing positive will happen to the economy or the stock market until oil prices come down, and come down dramatically. I feel the decline has already begun, and will accelerate into the 2008 presidential election.
The free market has turned into a windfall for those who turn the screws on us, "the little people".
