Oil Market Manipulation?

From The Pundit Master

Until recently, I didn't really buy the market manipulation scenario. Rampant speculation? Sure. But when someone buys a futures contract and doesn't actually take delivery, the oil doesn't leave the market. Over time, things would even up. But when I start hearing 40 year veterans of the markets, and even Saudi oil ministers saying things like "I've never seen anything like this", I have to start wondering if something else isn't going on.

I think I may have at least a possibility. What if a company or country or companies or countries that are taking delivery of crude, aren't really taking delivery of crude? What if some producers set up phony transactions? What if they went so far as to deliver the product, only to have it come right back through the back door?

Why? To inflate both production and use numbers. Prices are the result of market perception. If it looks like producers are going full tilt and barely keeping up with the demand, prices rise. Creating this appearance really wouldn't be that difficult, especially if you control the books, the production, the delivery and the inventory. It would be tough for an American company. It would be a piece of cake for a state run oil monopoly....or two.

I'm not saying it's actually going down that way, but if there were a way to manipulate a price surge, that's the only way I can think of to pull it off. The only way to discover it would be to take a good hard look at the specific companies that are taking delivery of crude and see if that crude is actually getting to end users, and actually getting used.

The Chevy Volt - Where Will it Take the Market?

From Captain Capitalist

Chevy is going full tilt into the electric car market with mass production of the Chevy Volt scheduled for 2010.

Actually, it's a hybrid, but it can be recharged by plugging in to a regular wall socket. It's a good start, and it can kick-start the rest of the market into high gear if demand is strong.

It could also impact the energy market in a big way. Consider that the federal government taxes gas to the tune of about 18 cents per gallon. State governments tack on even more. California's gas tax is a whopping 69 cents/gallon. In total about 15% of the price of gas goes to the government (by comparison the greedy oil companies net is about 4%). The big conflict between the government and the advent of electric vehicles is: How do you keep that revenue flowing?

What if electric vehicle technology goes fully electric? You can already buy home wind generators at Sam's Club and other retail outlets. What if you could power your car without even going on the grid?

The folks who stand the most to lose by a change in the status quo are not the oil executives, it's government; here and abroad. Producers will find something else to produce. Government produces nothing. It must find a new way to take.

There are a few ways things could go. First, we could see a resurgence in privately owned and operated roads. Toll roads could become much more common as revenues from pumping gas decline. This option makes too much sense, so is the least likely. Too much of the money flow would come out of the hands of Congress. Since controlling cash flow is where all of their power and influence comes from, they'll never go for it.

The government could dramatically hike taxes on electricity, but that would only encourage more private generation. They could tax generators, but I don't think the public would go for it, and it's too easy to get around.

The most likely scenerio is a dramatic drop in the price of crude well before the mass production roll out. Once politicians realize the threat, they'll suddenly come around to drilling in Anwar, off the coast and elsewhere to deal with our "energy emergency", yes, even the left will find some pragmatic justification for their 180 degree swing. This will just be cover. There really is no short-term supply crunch. We just let too much of the supply fall under the control of OPEC and friends. There is still plenty of untapped oil in the ground. Just as the falling dollar and demand in China and India have been used to explain the run up (as if the dollar fell 80% and/or demand in China quintupled in 18 months) the perception of increased supply will be used to explain the precipitous fall in the price of crude.

I don't know if it will work. There are a number of promising technologies that may well be able to compete with $28/barrel oil. Timing is key. If oil falls fast and far enough, a lot of investment dollars could come out of alternatives. If the players wait too long, they wont be able to get the genie back in the bottle.

The Scum that Could Save the World

From The Pundit Master

There's a new hero on the horizon in the war on terror. Is it a bird? Is it a plane? No, it's....pond scum.

Actually it's genetically engineered algae from a company called Sapphire Energy. Sapphire is developing the capacity to produce 91 octane gasoline that is fully compatible with existing infrastructure and vehicles, using algae, sunlight and CO2.

Unlike other bio fuels, Sapphire's product does not displace food crops. In fact, because its main components are CO2, sunlight and water that can be very low quality, dirty water, production facilities can be located on some of the most un-sought after real estate on the planet. Also, unlike other alternative fuels, the production is infinitely scalable. That is it can be ramped up to meet demand without limitations based on available land or location of raw materials. One could conceivable build multi-story complexes, even where space is tight.

How does this relate to the war on terror? The jihad is fueled by petrol. We currently send about 600 billion dollars a year overseas to accommodate our energy needs and that doesn't include the money we spend defending our global pipeline. Much of this money winds up in the hands of our enemies. We're financing the war against ourselves. A reliable, renewable, mass produce-able alternative to crude could put an end to all of that.

Sapphire is still in its infancy, but they're moving fast. They have attracted some major venture capital and hope to have their product on the market within 3 years. If they are successful, it wont take that long for their technology to have an impact. If oil's days are numbered, how do you think OPEC will react to a realization that their "100 year supply" of proven oil reserves will only have value for less than a decade?

That brings up the one defense the traditional oil market has: lower prices. Oil producers have shown the capacity to produce and sell their product at $20/barrel or lower. If they were to rapidly adjust prices in a defensive maneuver, they could put a damper on enthusiasm for and investment in alternatives. However, if technologies like Sapphire's are commercially developed before that, they will be able to match such price drops.

The key to the changing landscape has been a trend quietly developing in the scientific and industrial world toward recognizing that microbes are far more efficient than machinery at refining raw materials into usable commodities. With some genetic tweaking by some brilliant human beings, this technology will be applied to fields far beyond energy. It's already being used to produce medicines and the possibilities are immense for other products and commodities.

Best Things I’ve Learned from My Business

From Laura Benjamin

Long ago and not so far away, this single Mom with 3 kids to feed quit her corporate job. There were many dark and stormy nights ahead, but looking back I learned a great many lessons from running this business. I’ll share a few here and ask if you’d like to comment and submit your own list of ”lessons learned”!

Lesson #1: Better to build a community than to “network”

Networking is touted as the best way to build a business or career, but networking has gotten a bad reputation. Why? Because not everyone knows how to network effectively. You’ll watch them swap business cards, spend less than 2 minutes listening to the other person, then move on to the next one. Follow up is rare, sincerity even rarer.

Indeed, “speed networking” is promoted as the ultimate in efficiency. That’s where you spend less than 2 minutes with a person, then when the whistle blows, you move to the next one. It’s a takeoff on “speed dating”. To me that seems like gulping down a glass of rare wine in order to get to the bottom of the bottle!

A better use of time is to take the time to build a community. A Community is a high-trust, familiar group of folks who you’ve built relationships with. You may not see them very often, but you keep up with them from a distance. You respect one another. You appreciate the work they do, their level of commitment and their contributions. You know the struggles they’ve overcome and you never worry about putting your reputation at risk when you refer folks their way.

Lesson #2: There’s a big difference between gross and profit

I learned this one the hard way the last time I wanted to buy a new home. High gross income is one thing, but after all those deductions to keep your tax rate low, it’s good to show a profit. Looking back, I should have hired a CPA and bookkeeper much sooner rather than the “clueless” accounting method I used through my first five years in business. They could have helped me see which deductions to focus on, how to set up a system where I’d learn from year to year the most profitable use of my time and resources. Thank goodness I now have experts to help me see the light!

Lesson #3: Break out of inbred benchmarking circles

Most of us start out hanging with the people who do the same things we do. Perhaps it’s an industry association or professional group of like-minded people. Nothing wrong with “birds of a feather flock together” up to a point. But there’s value in breaking out to see what the rest of the world is up to. You can learn a lot from people in industries and occupations that don’t use the same acronyms. Yet too many of us remain stuck in worlds and social circles that are safe and familiar. Innovation comes by crawling out from behind the four walls and applying concepts from other fields to your particular product or service.

Lesson #4: Leverage the top 5% and create a “Blue Ocean”

There are certain traits, talents and skills you possess that, if leveraged properly, are going to take you further - faster. Sure, you can do the other 95% in a competent manner but those accomplishments will keep you stuck in mediocrity. Better to hone in on the one or two things you do with such style, grace, ease and excellence that you blow the competition away. In fact, you make the competition irrelevant! (Read the book, Blue Ocean Strategy for more on this concept).

You may wonder, “But how do I figure out what my top 5% talents and skills really are?”

Well, you do the work. You make lists, take assessments, ask people who know you well. Dig deep into the personal and professional experiences you’ve had along the way that made you feel accomplished, energized and certain that you made a difference in some small way. Focus in on the top 3-5 things that are the “best of the best” and you’ll be on your way. Then build your work, a business, a career around those 3-5 things. Promote them, find ways to fit them into your daily activities whether you get paid for it or not. Pretty soon you’ll find that just like putting the right kind of “seed” in the birdfeeder, the right kind of “birds” are coming your way!

Lesson #5: Avoid the Expert Myth and Build Self Confidence

The Expert Myth is thinking you have to be an Expert with a Capital “E” in order to pursue a new career, go for that promotion, launch a business, etc. Ask any professor or instructor who is given a new class to teach - you just need to be one chapter ahead of your class. You don’t have to know everything, you just have to know enough to help someone else. The more you put yourself out there, the more you learn, and the more you’re able to help others with something new. To paraphrase Pablo Picasso, “I try to do the things I cannot do so I may learn how to do them.”

As usual, I could go on and on. It seems like I learn something beneficial each day from running this small business. And you know the funny thing? I’m learning more about myself and other people than I am about business and that once again reinforces my favorite saying, “It’s never just business - it’s always personal!”

Now, let the day begin!

Laura Benjamin, writing from 6711 ft. above sea level in warm and sunny Colorado

Laugh and Get Rich

From Bliss Sawyers Marketing Blog

I had the great opportunity to be on the same stage as Darren LaCroix last week. A great speaker, Darren is also the author of Laugh & Get Rich, a fabulous book on How to Profit from Humor in any Business. I read it in two days. Would have finished it in one, but had to get my kids cheerios for dinner. Again.

I've always said it isn't the numbers that motivate borrowers to make application with a certain originator, it's the emotion behind the numbers and the connection they feel. LaCroix summed it up nicely when he said: "We don't live in a rational world and we don't deal with rational people. It's emotions that move decisions."

If work is fun... you perform better at your job. If you make it fun for your referral partners, clients and prospects to work with you, the business will just naturally follow. This book will give you some great ideas to build stronger relationships, differentiate yourself from the competition (who doesn't want to do that!) and SELL MORE. Hmmm.... seems to me like everyone needs this book.

We spend a tremendous amount of time working. Hours and hours and hours. More than we spend with our loved ones and more than we spend biking. Or golfing. Or any of the other things we like to do. So I wonder why more people don't have fun at work. Maybe they just don't want to be rich.

Making Yogurt

From Wifezilla

After my previous experience trying to find full-fat plain yogurt in the grocery store, I got the wild idea that I should try and make my own. A quick Google search for the keywords "yogurt making" gave me more results than I could possibly read in a lifetime. Fortunately, this site had pictures, and, being the visual person that I am, I used their guidelines.

A cooler, jars and a candy thermometer were things I already had on hand. The Walmart that frustrated me by not carrying yogurt DID have Stoneyfield low fat yogurt to use as a bacteria source and inexpensive heavy cream. (If I was going to go through the trouble to make yogurt, I was damn sure going to get my fat!)

I cleaned everything, sterilized the heavy cream and let it cool. I added the Stoneyfield to the warm cream, filled some containers with hot water, put the cream mix in glass jars and popped it in to the cooler.

6 hours later, I checked what I hoped was now yogurt. It was close. While it did thicken up a bit, it was a tad on the runny side, but it did taste like yogurt. The richest creamiest yogurt I ever tasted. Other than the texture, I was pretty happy. I took a chance and poured the slightly runny yogurt in to a coffee filter lined strainer and put that in a bowl and it all went in the fridge. (This is the method used to make "yocheese" or an approximation of Greek style yogurt.)

The next morning I checked my mix and I had a nice thick creamy yogurt. Only about 1/4 cup of whey drained off, but it was enough to firm everything up. Some of the heavy cream yogurt went to make salad dressing, some was mixed with unsweetened coco and splenda for a delicious chocolate dessert, and there is even some left. Maybe. Hubby has been home for an hour now and I am still at the office. Hummmm...

Anyway...I will sure be doing this again. Even with a slight goof it still worked. Maybe I'll be using half and half next time to make it an even better bargain and a little less rich (it is almost TOO rich even for me using only heavy cream....almost :D ). If you are feeling brave, check out the tutorial and give it a try. If scatter-brained me can do it, you have a good chance at creamy success.

A Stimulating Proposition

From Captain Capitalist
Suppose you're a municipality searching for ways to encourage and enable small business success in your community. What type of incentives should you provide? To whom should you offer them? You can't answer these questions without an understanding of the role of the small business in the economy.

First of all, you have to understand what makes a market. Transactions take place when I have something that is of more value to you than it is to me. For example, I have a marble handled widget polisher. In my opinion it's worth $1.80. In your eyes it's worth $2.20. I offer it at $2.00. A transaction takes place. Difference of opinion in regard to value is what makes a market.

Second you need to understand what types of businesses are necessary for the local economy and how you go about determining "what we need". Too often this is done in meetings or even public forums. Neither of which is more efficient than the market. It has been conventional wisdom that for a business to thrive, it must grow. However, as Doug Tatum points out in his book "No Man's Land", not all business models are conducive to growth. Some work better on a small scale. Indeed there are a number of businesses that have existed for decades that never have had more than a couple of people working them. Are they not valuable? How do you know? The fact that someone is making a living doing something is evidence in and of itself that the activity has value to the community. You cast a vote every time you buy something. You're saying "I like that" "Keep doing it".

Third you must look at how the small business fits into the overall economy. Large businesses need small businesses. Even big call centers need their carpets cleaned, their windows washed, they need phone techs, somewhere for people to eat lunch, office supplies and a host of other support products and services. These things cannot always be efficiently provided by other large businesses. In addition, the small business market offers a place for employees of large business to go when they decide it's time for something new. The typical large business has a few great paying jobs and a lot of not so great paying jobs. The supply of opportunity does not meet the demand. The small business market provides a venue for new ideas and innovation that may not fit the bill for the company someone is currently working for. The economy is not a big business vs. small business proposition. They work in tandem.

How can government help? Primarily by understanding and being aware of the principals above. Let's look at the marble handled widget transaction again. Suppose I were required to collect a sales tax, have a pre-sale safety inspection and file a widget sales registration for a fee. Now the price of the widget has increased by 50 cents, the "cost of commerce". Remember in my mind the widget was worth $1.80. For the transaction to make sense from my end I have to get more than $2.30 for it. But, in your mind the widget is only worth $2.20. You'd have to get it for less than $2.20 for the transaction to make sense to you. The transaction doesn't take place. The cost of commerce has squelched it. It is an obstacle to the free market. Governments interested in promoting commerce should focus on minimizing the cost of commerce.

Which businesses should be helped? All of them, and equally so. As explained in point two, the free choices of free individuals will determine which products and services are needed or wanted. The role of government in this dynamic should be limited to restricting products and services that are for some reason undesirable to the community. All legal entities should be equally enabled in the marketplace. No one needs a gaurantee of success. Only the opportunity to put forth their ideas on a fair playing field.

Finally, all decisions on creating a thriving market environment should start with the premise that every business is valuable. A business that employs one person is of great value to that person. If the market deems them unworthy, they will fail. You don't have to push them out or encourage them to take on a growth strategy that doesn't make sense for their business model.

In the short term it is politically tempting to tamper with the mechanics of the free market. After all, if a policy is implemented with your name on it and it leads to some measure of success, it can greatly further your career and your stature. However, the market doesn't respond well to tampering in the long term. One of the best things a municipal govenment can do to stimulate creativity and energy in the local marketplace is to understand and trust the free market and occasionally send a message to participants: "Thanks for participating. We're glad you're here. Keep up the good work." Then, just let the market do its thing.