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Winter Energy Outlook 'Grim' MoneyNews
(Headlines - scroll down for full stories) 1. Analyst: Winter Energy Outlook 'Grim' Even oil-happy American consumers have their breaking point - and apparently it's gasoline at $3 per gallon. With record-breaking prices at the pump, Americans may finally be weaning themselves off of foreign oil - incrementally, at least. That is the message behind yesterday's Bloomberg report that crude oil and gasoline prices dropped yesterday on signs that U.S. consumer oil demand is in decline.
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"We are starting to see a change in consumer behavior," Michael Fitzpatrick, vice president of energy risk management with Fimat USA in New York, told the news service. "Consumers are cutting back because of high prices, rising interest rates and signs that the housing bubble is ending. Prices have probably begun the long, steady process of grinding lower." According to the U.S. Energy Department, demand for gasoline in the four weeks ended Sept. 23 was 2.8% below that of the same time period in 2004. But that hasn't helped consumers at the pumps yet. As of this week, the average U.S. pump price is about $2.928 a gallon, says the Energy Department. "We're going to see prices move lower," says Peter Beutel, an energy consultant and president of Cameron Hanover Inc. in Connecticut. "We've already hit this economy with a huge, huge shock," Beutel told Bloomberg.
While demand is in decline, the reversal won't be as sharp as some expect, industry observers say. Any demand cutback "is going to be a process," says Fitzpatrick. "It took two years to get here, and a reversal won't be engineered overnight, or in a week or a month." The demand issue grabs the spotlight as U.S. refineries are ramping up rehab efforts after damage inflicted by Hurricane's Katrina and Rita. Yahoo News reports that still in limbo were the 1.35 million barrels of oil that typically would have flowed each day from the Gulf of Mexico's refineries. Oil traders expect that it will take months for all of the Gulf-area refineries to be back up and running. Offshore natural gas - a critical supply source in the Gulf - will be hardest hit, especially as winter approaches. Natural gas futures closed at a record high on Tuesday, with traders saying that, per barrel, natural gas is worth $20 more than crude oil. "The outlook for winter is grim, and the threat to the U.S. economy is real from extremely high gas prices and shortages," said Energy Intelligence analyst Tom Wallin in a research note. "Market talk is of gas at the equivalent of over $100 per barrel this winter." Higher heating-oil prices could have a ripple effect on the rest of the U.S. economy. Heating bills could be 40% higher than last year, and natural gas prices as high as 70% more, says J.J. Burns, CFP, president of J.J. Burns & Company in Melville, NY. Come December, that could impact holiday retail sales. "Looking forward, this could mean a leaner Christmas for the retail and the casual-dining industries," Burns points out. "People are going to be paying higher utility bills, so they are going to have to cut back somewhere." Those who hold stocks in these sectors "may find coal in their stocking this year," says Burns. Meanwhile, crude oil futures traded evenly in overseas markets early on Wednesday, after falling $1 per barrel on Tuesday. Oil futures fell to $63 a barrel on Tuesday, hitting their low-water mark for the past two weeks. Overall, prices have declined 11% since hitting a record $70.85 a barrel on Aug. 30, the day after Katrina made landfall. Oil is 27% higher than it was in October 2004, Bloomberg reports.
2. Oil Prices Cracking. Act Now and Capture 70 to 100% Trading Profits From Today's Bust If you have been following our commentary recently, you'll know that here at MoneyNews and Financial Intelligence Report, we have been bouncing around the idea that perhaps the price of crude has gotten ahead of itself. That day has now arrived - and it's time you take advantage of this huge opportunity for monster profits in the coming months. Just yesterday, our trading expert Andrew Wilkinson sent an urgent alert to our SectorTrade subscribers, advising them to sell short the oil services sector. Today it appears the technical support for oil has given way, opening the door for huge profits for those who act now. You can join us too, but you'll need to understand precisely what to do. We are expecting 70% returns on this trade and possibly up to 100% returns if speculators return the favor on the downside this time. All our research points to the price of oil falling back here in the short term - causing the oil services sector to decline by some 19%. If that happens before the end of June 2006, our option should increase from its current $800 cost to at least $1,360. That 70% rise is the reward for taking this risk today. Financial Intelligence Report, the sister publication of SectorTrade, predicted in April 2004 that crude oil prices would rise to about $60 per barrel within 12 months - which, of course, it did. Now FIR is boldly predicting that oil prices will slide back to the low $40s per barrel. I want you to be there with us to profit from this coming drop in prices. There is rarely an opportunity to profit like this. So don't miss out. Steve Forbes, CEO of Forbes Inc., shares our opinion when it comes to the price of oil. He recently outlined why he felt that a large part of the high price of oil was down to pure speculation. Mr. Forbes predicts a crash for the oil price and compares it to the bursting of the Dot-Com era, when many technology-related stocks went to the wall and others saw share values slump. He acknowledged that strong demand for oil from emerging nations, such as Brazil, India and China, was partially responsible for the move, but he felt that much of the blame fell upon hedge funds and speculators, who could be responsible for perhaps $30 of the current $60-per-barrel price of oil. Share prices of many of the companies included in this index have soared during the last 18 months in response to growing revenues, as the price of the goods they sell increases. However, we're not sure this will go on forever. So the time to profit is now. Go here now for details on how you can get in on the action. For months, OPEC - which supplies four out of every ten barrels of global oil - has tried to tell the world that there really is enough oil to go around. Only after the hurricanes have ravaged the Gulf Coast do investors now realize that it really is a problem with refineries, which have been starved of investment over the years. We've been shouting "It's the refineries, stupid!" for quite some time. Now it's time we take action and profit from this misinformation from Wall Street. Thanks to natural disasters, we are likely to see a glut of oil build-up in the final quarter of 2005. I fully expect speculators to start lightening their load. OPEC's case has been proven: There is plenty of oil - it just needs to be shifted. The world is NOT running dry! As a result, we expect some significant deflation of oil share-related prices. Our SectorTrade subscribers are positioned now for big profits. We want you to be there with us. Go here now to get all the details on this blockbuster new trade and to take advantage of this special offer before it's too late.
3. Pay Off Your Mortgage? Not So Fast Burning the mortgage used to be a rite of financial passage. But with interest rates near historic lows, just because you can afford to retire your home loan, should you? "Assuming there's no prepayment penalty, paying off the balance yields a return equal to the interest rate on the loan," says J.J. Burns. "If that's more than you're earning on your cash, an early payoff might be worthwhile." If you don't have a fixed-rate loan, the equation is more complicated - thanks to the currently popular adjustable-rate mortgages (ARM) and interest-only ARMs. Yet with balloon payments usually looming after a low initial "teaser" rate, paying off the mortgage makes sense. But don't let the tax write-off on mortgage interest fool you. "A 5.75% fixed rate with the 35% mortgage interest deduction reduces your ‘payoff yield' to 3.75% -- still usually more than the after-tax return on keeping the cash in a money market account," says Burns.
However, a bond fund or U.S. Treasury may give you more after taxes, thus making the mortgage worth keeping. Tax-free bond funds pay better than 4%. 4. Study: Real Estate 'Flipping' Pays Off Big Jealous of that obnoxious co-worker who's been bragging about making a killing in the short-term real estate market? Maybe you should be. First American Real Estate Solutions, a California property-analysis firm, released a new study this week that offers seldom-revealed details about the practice of real estate "flipping" - the re-selling of residential properties for profit within 24 months of purchase. Titled "Real Estate Flipping: Gold Mine, Mistake or Fraud," the study - by Christopher Cagan, Ph.D., director of research and analytics at First American - also hones in on profits made from flipping residential real estate properties from 1999 through June 2005 in three of the hottest real estate markets in the country: Las Vegas, Miami and Orange County, Calif. The study draws a distinction between legitimate flipping - defined as the purchase and quick resale of distressed or undervalued property for profit - and fraud, whereby the perpetrator uses false information in a real estate transaction to obtain unlawful profits. The verdict? Flipping, as suspected by many investors itching to get in on the action, was worth it. Cagan points out that real estate prices have risen dramatically in recent years, with annual appreciations of 20 to 30% in some areas. His study shows that flippers obtained returns far in excess of those strong gains - above 100% per year in many cases. The particularly profitable "sweet spot" of the elapsed time between purchase and flip sale is revealed through statistical analysis as being from three to six months. Other key findings include disclosure of gross and adjusted rates of return for different types of flip resales and identification of specific zip codes where flipping was the most frequent and where the highest returns were obtained. "While the market has done well overall, flippers have done even better," said Cagan. "During the past six years, flippers have exercised a level of strategic intelligence and savvy in their investments that proved to be even more profitable than the strong gains experienced by the general market. "Among the strategies employed by purchasers who flipped properties within two years were: investing in the hottest local markets; purchasing distressed, undervalued or foreclosed properties, and taking advantage of the psychology associated with a market experiencing higher-than-historical rates of appreciation to earn spectacular returns on their investments." Editor's Note:
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