Tuesday, May 27, 2008

The price of Gas

It cost us $53 to fill up the mini-van on 5-26. Gas was averaging $3.80 a gallon. Some commentators are already projecting significantly higher prices and saying that we will look back with nostalgia at $4/gallon gas.

Why has it come to this? An emotional part of me says that we are getting our come-uppance after gorging when gas was less than a dollar in the 90s. However, as widely reported there are a combination of factors.
1) the concept of peak oil
2) increasing demand in the US and more importantly rest of the world
3) no major oil field discoveries (except Brazil) and constriction in supply in areas with oil due to socio-political issues
4) aging infrastructure for transporting and refining oil
5)speculative trading

As reported in the Wall Street Journal on 5-27-2008, it is still unclear if the rise in gas prices can be quantified as a bubble. The uncertainty mainly arises due to a difficulty in figuring out the fundamental value of a commodity. However it does appear that speculation and trading sentiment has driven the price of oil at least a few points higher than it should be.

What are the options for the Joe-Schmo's? Very few. It is amusing to a feeble mind though to see people rushing to ditch their less fuel efficient vehicles for ones marginally better. People almost seem to disregard the fact it does not matter whether you pay for a new car or pay more for gas on an old one, it is still money out of the door.

Perhaps an analysis on gas usage through a site like mpghead would be in order as also a perusal of the government benchmarks for fuel efficiency.

Personally, I have been hard pressed to get anything consistently over 20mpg on a mid-side car when I have rented one. So I will continue to limp along on my 15mpg Jeep until the inconveniences of a faltering air conditioner prove to be too much.

Tuesday, May 6, 2008

Euphoria over Interest Rates

Do you invest in the stock market and are you sometimes perplexed about the stock market reaction to the Fed's action be it in raising or reducing the interest rate?

Given the transparent nature of the Fed these days, they all but tell the market what they intend to do in their meetings. So the meetings almost appear to be a formal declaration of intent rather than a debate on the best course of action.

However, in my simple mind, I can't understand the euphoria a 1/4 point interest rate cut or the dejection a similar increase commands. There is a several 100 point dip in the market if the rates raise and a similar gain should the rates reduce.

I can understand that the fed sets the benchmark rate and that the banks lend money to their consumers after tacking some points to this rate. But I can't really figure out how a 1/4 or a 1/2 point increase or decrease materially affects the lending or the borrowing of money for anyone but for the most borderline customer whose credit or repayment ability is so compromised that this becomes a big deal.

Truly, have you set your mind on a car or a remodel? Would you stop this project based on a small interest adjustment in any direction? I wouldn't and I can't understand why the stock market could care!

Teacher Appreciation Week

As many parents in the United States (at least those with school going kids) are aware, May 5 to May 9 is teacher appreciation week.

Sure enough the grocery store had "Teacher Appreciation Gifts" including single roses and the like.

There appears to be elaborate planning involved by room moms in classrooms across the country in planning the week's festivities. Our kids were requested to bring flowers one day, a sweet snack another day and a salty snack the third. The PTA contributed some goodies the fourth day and the children were expected to contribute a book the final day.

In all, the festivities left me a little under whelmed. Call me a cynic but when did school become a series of gift exchanges? God know that teachers deserve all the appreciation that they can get. But when does it go from being heartfelt to a mechanical marking of the occasion?