yitbos
Posted on 07/07/2008 9:45:12 PM PDT by bruinbirdman
Not long after he took over at the Federal Reserve in 1987, Alan Greenspan was faced with questions about what to do with the Fed funds rate. After polling the various Fed presidents, in September of that year Greenspan found that there was "good growth, high optimism and full employment--all reasons to be leery of inflation." According to his biography the various FOMC members were persuaded "that the Fed would have to raise rates soon."
In describing the thought processes at work, Greenspan plainly wrote that in order to "subdue inflationary pressures, we were trying to slow the economy by making money more expensive to borrow." Greenspan's thinking belies the consensus today, suggesting rate increases would aid the dollar. More realistically, the Fed has traditionally hiked rates to reduce dollar demand. From January to mid-October 1987, the Fed raised it target rate 125 basis points, but the dollar weakened in gold terms from roughly $400 an ounce to a high of $481.
~snip~
Fast forward to today--in some ways there are shades of 1987 in the economic backdrop. China has replaced Japan as the trade miscreant, with anti-China trade legislation ever a threat, thanks to a political class eager to be seen doing something for the allegedly down-and-out American worker. And while LBO transactions aren't threatened by tax changes, those who engage in this kind of activity face the threat of tax increases when it comes to "carried interest" that would reduce the incentives for those in this space to transact at all.
On the monetary front, the dollar has been weakening since 2001 amid varying rate stances from the Federal Reserve. Its fall vs. gold began alongside rate cuts, accelerated during 425 basis points of rate increases, and it has continued during the latest round of cuts.
(Excerpt) Read more at forbes.com ...
I remember quite a few of us on here talking about how Ginnie Mae and Freddy Mac were being screwed up by Clintonite flunkies including Jamie Gorelick of "the wall" fame, or should I say "infamie!" Now that mess is finally having it's covers pulled after the looting by Clinton, Clinton & Gore has been completed.
So much bad news and so little competent and honest leadership!!! God spare America!!! I don't really need anymore "buying opportunities" at this time!!!
Question, "Don't you suppose that big oil companies, the guys who know oil, who pump, ship, refine, sell at retail, ie. BIG OIL have 'long term contracts'. Like $50 oil? Why is every gas station selling it like all oil was bught at $140?"
Limbaugh had no answer and went to commercial.
yitbos
A great question, but the answer is most likely "no", at least on the scale that is implied by the question. Material forward contracts would have to be disclosed in their financial reports.
Gold mining companies, on the other hand almost always DO have substantial forward contracts where they pre-sell their production.
Because gas stations have to look at inventory replacement costs, not just the value of the current inventory.
Limbaugh had no answer and went to commercial.
My answer would be no they don't. Wouldn't that be considered insider trading? Working in a business with knowledge of soaring prices and you buy contracts within your own company to bet against the high cost? Besides there is no point since they pass their fuel costs onto the customer!
To answer the question that Rush didn't: the reason gas stations are selling their product as though it were bought at a high price is because it probably was - underground storage capacity for most service stations is roughly one to two week's supply. The product in those tanks was most likely purchased and refined within the last three months, but the price you pay at the pump though reflects not just the cost of that oil but its replacement cost to the dealer as well. If a dealer cannot pay for his next delivery, he's out of business.
yitbos"
Rush has always, repeatedly stated he will not entertain questions on boring consumerism like utility rate increases, etc. It's just too boring to the listeners he is after. Hope that helps.
sobtiy (grin)
P.S. I see someone just up-thread has answered the question, nonetheless.
yitbos
yitbos
OK. I'm Exxon. I can drill, transport, refine, distribute, and sell at retail outlets.
I make a deal with Nigeria for some of their natural crude resources. If they let me exploit some oil, I will cut them in on the value. What value is untapped oil? I cut a long term deal with them.
If I cut a deal with Uncle Sam to drill and extract oil on an offshore lease, I pay a royalty to Uncle Sam on what I extract. Do I pay him a fixed rate for each barrel? For how long? A percent of what I can sell it for? What if I am vertically integrated and I sell it to myself?
yitbos
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