Before I get into my rant for today, I have found some every interesting information about the oil and natural gas markets. In addition to oil and gas info, the data includes information about gasoline, diesel, and heating oil supplies. Every interesting information and summary reports by the United States Energy Information Agency, eig.gov. You can find the link on our website under the major tab, “World Oil Price Phenomenon.” Check it out. As an example, you will see that in the five years from 2010 to 2014, the United States increased it’s proved reserved from about 12 billion barrels of crude oil to 20 billion barrels. The data for 2015 is not available.
The year 2016 has certainly jumped off to a bumpy start. The Dow Jones Industrial stock values have fallen 1,000 basis points. The politics of the Middle East has gotten more tense. Apple has announced it is cutting back on the production of the Iphone. Gasoline prices have fallen to prices not seen in five or six years. All of this has developed since the Federal Reserve’s FOMC decided to start raising the Fed Fund Rate in mid-December and indicated they intended to continue rate increases in 2016. The Redneck does not believe the rate increase caused these events, but the future of other rate increases may be affected by these events. We will see as we move into 2016.
Economist pundits on the television and radio financial shows report the unemployment rate is now below 5%. Wow, great compared to 2009 when it approached 10%. Others say not so good. The jobs created are not high salary technology or industrial manufacturing jobs, but low paying service type jobs. While on a recent hunting trip, I conjured up a new Redneck analogy. I can remember when a good hamburger cost $1.00. The minimum wage was $1.00. Now a good hamburger costs at least $7.00. The Federal minimum wage is $7.25. In 2005, when the minimum wage was $5.25 and good hamburger cost $5.25. Watch the price of hamburgers. It’s the new economic barometer. CNBC aired an interview with the CEO of a restaurant chain. See his views on raising the minimum wage at the link on our website under “Miscellaneous.”
The Redneck will be watching several important elements of this complex world economy in the coming months. One will be the world oil inventories and production. Another will be the actions of the FOMC regarding future interest rate increases, and third will be world political actions. All three will have significant influences on our individual financial wellbeing. Oh, did I forget we will elect the next President of the United States? We will hear promises upon promises from the candidates about what they will do for us. Will it be tax reductions, or new jobs, or smaller government, or fighting terrorism? Probably all of the above. But, individually none of them can do any of it by themselves.
When I was a young teenager I mowed lawns to make some spending money. At the end of the summer I proudly announced to my Dad that I had accumulated over $50.00. He told me I needed to put that money in the bank and invited me to come downtown to his office and we would go to the bank to open my first account. I met the bank president who invited me and Dad to have coffee down the street at the local café. Sitting around the table were several other local business men and soon the discussion was about the local economy. The old bank president in a loud voice said, ”whatever happens on the East and West coast will happen in Texas in about two years. It doesn’t matter if it economic fortune or failure, the length of women’s dresses, or the width of a man’s tie.” I would guess that today he would say whatever happens on the other 6 continents will happen in the US in the matter of hours, not years, as it relates to the financial markets.
Stay vigilant my friends. We are in for a rocky start to this new year.
The Redneck.