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Why $120 oil is good
cnnmoney.com ^ | May 8, 2008 | Steve Hargreaves

Posted on 05/08/2008 9:35:15 PM PDT by kellynla

NEW YORK (CNNMoney.com) -- With $120 oil not seeming to follow the fundamental law of supply and demand many are wondering if the market is broken.

The Federal Reserve has been cutting interest rates, saving Wall Street but sinking the dollar and driving up food and fuel prices. Investors, also called "speculators" by some, have been pouring money into commodities of all sorts, artificially driving prices higher in an attempt to squeak out healthy profits in the face of falling stock values.

But to many, all the financial voodoo is merely a distraction. The fundamental reality of oil - and the thing that makes it so attractive to investors in the first place - is that we are using ever more and finding ever less. High prices are necessary if we are to reduce demand, find new oil, and develop alternative technologies.

"The market is starting to send a signal: You got to get your alternative in line," said Robert Kaufmann, director of Boston University's Center for Energy and Environmental Studies. "Societies that ignore this kind of signal do so at their own peril."

Kaufmann isn't promoting the so-called "peak oil" theory - he doesn't think the world is quickly running out of oil.

(Excerpt) Read more at money.cnn.com ...


TOPICS: Business/Economy; Culture/Society; Extended News; Foreign Affairs
KEYWORDS: crude; energy; oil
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"Speculators are often blamed for artificially inflating crude prices, but some experts say high prices are needed to cut demand and develop new resources."
1 posted on 05/08/2008 9:35:15 PM PDT by kellynla
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To: thackney

ping


2 posted on 05/08/2008 9:36:17 PM PDT by kellynla (Freedom of speech makes it easier to spot the idiots! Semper Fi!)
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To: kellynla

bookmark.


3 posted on 05/08/2008 9:37:18 PM PDT by mysterio
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To: kellynla

This from people who ride limos and the subway to work.


4 posted on 05/08/2008 9:41:13 PM PDT by 2ndDivisionVet (McCain could never convince me to vote for him. Only Hillary or Obama can!)
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To: kellynla
...high prices are needed to cut demand and develop new resources."

...high prices are needed to cut demand and develop new resources. to force action, such as DRILLING FOR MORE AMERICAN OIL!!!"

That's better.
5 posted on 05/08/2008 9:43:07 PM PDT by papasmurf (Unless I post a link to a resource, what I post is opinion, regardless of how I spin it.)
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To: kellynla
With $120 oil not seeming to follow the fundamental law of supply and demand...

Stopped reading here. What BS.
6 posted on 05/08/2008 9:43:30 PM PDT by Terpfen (Romney's loss in Florida is STILL a catastrophe. Hello, McCandidate!)
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To: kellynla

With the dollar falling, I bet alot of the change in oil price is due to that rather than demand. Of course, demand is a factor, but throw in the dollar debasement and you get to 120 pretty fast.


7 posted on 05/08/2008 9:45:22 PM PDT by Goreknowshowtocheat
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To: kellynla

The high prices are merely an artifact of our artificially-depressed dollar.

The Fed should be setting the interbank rate at closer to 5% rather than 2% - it’s widely recognized that this rate should be almost identical to the annual rate of growth of the economy, the GDP.


8 posted on 05/08/2008 9:46:25 PM PDT by Redbob (WWJBD - "What Would Jack Bauer Do?")
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To: kellynla; All
As a side note to the pros and cons of the rising price of oil, I'm keeping an eye on the following development in non-corn ethanol production.
Non-corn ethanol
Also, there's indication that people might get as much or more bang per buck for their gas dollars with gas / ethanol mixtures.
Gas-competitive gas / ethanol mixtures

9 posted on 05/08/2008 9:47:09 PM PDT by Amendment10
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To: Redbob

Of course, if we can import more cheap Chinese plastic junk toys and move them around and mark them up multiple times, we can make our GDP boom!!

The GDP gives such a false sense of prosperity when we get into imports.


10 posted on 05/08/2008 9:50:20 PM PDT by Gondring (I'll give up my right to die when hell freezes over my dead body!)
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To: Amendment10

Don’t forget butanol!


11 posted on 05/08/2008 9:51:41 PM PDT by Gondring (I'll give up my right to die when hell freezes over my dead body!)
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To: kellynla
It is simply a bubble.

Everyone always says "it is different this time". It isn't different.

Real estate wasn't different in its 2001 to 2006 bubble. Tech stocks weren't different in their 1996 to 2001 bubble. Junk bonds weren't different in their 1986 to 1991 bubble. Etc. Etc. Etc.

Commodities are the latest, that is all. Oil is in a bubble, grains are in a bubble, gold was in a bubble and has already begun correcting. Brazil is also a bubble. China was a bubble and is already correcting.

People who know nothing of finance outside of the one market they are looking at throw a straw, think the world has changed when the bubble gales roll through their favorite asset. The world hasn't changed. Only the speculative plaything of the week.

12 posted on 05/08/2008 9:56:07 PM PDT by JasonC
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To: kellynla

Energy Policy:

1) Open all federal lands with oil and natural gas potential for exploration.

2) A Manhattan Project to build new nuclear power plants like nuanced, environmentally conscious France has done.

3) Stop using grain for ethanol production for fuel.

4) Use nuclear power generated for desalination to solve water shortages.

5) Continue to explore and develop alternative energy and fuels, but with the idea that these are long term, not short term priorities.


13 posted on 05/08/2008 9:56:07 PM PDT by LongTimeMILurker
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To: kellynla
["The market is starting to send a signal: You got to get your alternative in line."]

It's government who is manipulating the market, to achieve an objective which, if put up for a vote, would see them losing 100-0. We are sheeple.

14 posted on 05/08/2008 9:58:17 PM PDT by Mad_Tom_Rackham ("The land of the Free...Because of the Brave")
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To: kellynla

Hello, kellynla, attack dog.

This is tennteacher signing off. You are a jerk of the first order.

No more posting. No more contributions. Enjoy.


15 posted on 05/08/2008 10:01:29 PM PDT by tennteacher (Sowell and Will - in the tradition of William F. Buckley)
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To: kellynla
From my standpoint, the reasons why $120-a-barrel oil is good (and why $150-a-barrel oil would be even better) are twofold: (1) we do very little driving--perhaps 25 or 30 miles per week, on average; and (2) our IRA's energy fund has increased exponentially over the past 16 months (it was at that time that I rolled over my 401(k) into a low-cost energy-fund).

Admittedly, at this stage of my life, a sector fund is rather risky. That said, however, I have no intention of switching to a balanced fund or an asset-allocation fund--or some other "safe" investment--just now. Oil will probably go much higher before it plateaus--especially if Israel should take out Iran's suspected nuclear facilities, as I expect to happen before 2008 belongs entirely to history.

16 posted on 05/08/2008 10:01:33 PM PDT by AmericanExceptionalist (Democrats believe in discussing the full spectrum of ideas, all the way from far left to center-left)
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To: kellynla

I want one of those French cars someone invented that runs on compressed air. It is @4300 psi and you can fill the tank in 2 hours with a compressor that comes with the car. Runs like a regular car with 130 mile range. $7000 is the price tag. For 22,000 you can get one with a gas engine also. The engine refills the compressed air tanks....giving you 100 mpg.


17 posted on 05/08/2008 10:07:01 PM PDT by TheLion
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To: Terpfen
Stopped reading here.

My sediments as well, i.e. one doesn't need to read any further after the first sentence.

18 posted on 05/08/2008 10:11:45 PM PDT by LjubivojeRadosavljevic
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To: tennteacher; kellynla
Pffffffffffttt!,,, Image and video hosting by TinyPic "Hello, kellynla, attack dog."...;0)
19 posted on 05/08/2008 10:15:47 PM PDT by 1COUNTER-MORTER-68 (THROWING ANOTHER BULLET-RIDDLED TV IN THE PILE OUT BACK~~~~~)
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To: papasmurf

If we just had a Republican candidate with a pair who could say to the unions, “Back me, and I’ll push for oil drilling jobs in Alaska and North Dakota....”


20 posted on 05/08/2008 10:18:49 PM PDT by gunservative
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To: 1COUNTER-MORTER-68

Aren’t you cute.


21 posted on 05/08/2008 10:20:18 PM PDT by tennteacher (Sowell and Will - in the tradition of William F. Buckley)
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To: 1COUNTER-MORTER-68

JERK!


22 posted on 05/08/2008 10:28:16 PM PDT by tennteacher (Sowell and Will - in the tradition of William F. Buckley)
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To: papasmurf

drilling for more oil only delays the inevitable reckoning. Say ANWR has oil beyond the wildest geological expectations. It just puts more oil on the market to be bid up by China and India, and in ten years or whatever, we’re right back where we are now. Where’s the next big technology that gets us off oil altogether? I see news about little projects here and there, but no big breakthrough. We need another Manhattan Project, and I don’t see it happening. The Democrats want to tax the oil companies. The Republicans, when they talk about it at all, want to drill more wells and build more refineries. That’s great, but that alone won’t fix our long term energy problem.

I hate to be a pessimist, but I see nothing happening that will change things. The Energy crisis will be ‘solved’ when thw worldwide economy crashes due to stratospheric oil prices, and the price comes down because nobody can afford to buy it any more.


23 posted on 05/08/2008 10:29:19 PM PDT by balch3
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To: kellynla
"Speculators are often blamed for artificially inflating crude prices, but some experts say high prices are needed to cut demand and develop new resources."

Unfortunately the government can step in and introduce external forces, like subsidies, which make for very expensive boondoggles, like ethanol from corn.

I really think that were the oil companies to be freed up from the government shackles, AND were the government to stop using tax penalties and breaks to influence what the energy companies do, we would have had alternate sources of energy decades ago.

Mark

24 posted on 05/08/2008 10:33:57 PM PDT by MarkL
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To: kellynla
and develop new resources."

To the nimrod author -- we can't develop resources when we know where they are but the frickin gubmint won't let us drill there.

25 posted on 05/08/2008 10:37:36 PM PDT by webschooner
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To: AmericanExceptionalist

Just as I bailed out of the tech market when some guy was telling me what IPO to buy as we sat in the hot tub at my friend’s condo, the fact that someone on FR is writing about their energy based mutual fund—and how it will go higher until it plateaus—is a an indication of froth at the top.

Really, I mean no offense to you personally. I am glad that you have done well. But the pole on oil is pretty high, and nothing goes up like that forever. You might get to $130, but by the end of summer, I bet we are back under $100.

Sure, you might be right. Sure, the ME could explode tomorrow. But my guess is that the price has gone up so fast over the past couple of weeks—without the corresponding fall in the dollar—that the bubble is about to take a hit. If the dollar were that bad, gold would not have fallen 20% from its high (or around 20%)

Just about the only Kennedy thing I keep in my head, is Joe Kennedy talking about getting stock tips from his shoe shine boy. When that happened, he bailed out of the market and turned to bootlegging. Not a bad story to remember.


26 posted on 05/08/2008 10:42:47 PM PDT by Vermont Lt (I am not from Vermont. I lived there for four years and that was enough.)
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To: balch3
“...hate to be a pessimist, but I see nothing happening that will change things. The Energy crisis will be ‘solved’ when thw worldwide economy crashes due to stratospheric oil prices, and the price comes down because nobody can afford to buy it any more.”

Satire or nonsense?

I quote, you decide. That's almost as good as Yogi Berra's restaurant comment: "Nobody goes there anymore, it's too crowded. By the way, if you really hated being a pessimist, you wouldn't be one.

27 posted on 05/08/2008 10:48:01 PM PDT by SaxxonWoods (If you don't vote, you don't matter.)
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To: tennteacher

Harley hikes his leg on your rare Japanese maples!!!

And runs away!!!(boogity~boogity~boogity!)...;0)(snicker)...


28 posted on 05/08/2008 10:53:33 PM PDT by 1COUNTER-MORTER-68 (THROWING ANOTHER BULLET-RIDDLED TV IN THE PILE OUT BACK~~~~~)
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To: LongTimeMILurker

6). Build oil refineries on shut down military bases


29 posted on 05/08/2008 10:58:47 PM PDT by spokeshave (Hey GOP...NO money till border closed and criminal illegals deported)
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To: kellynla

I think greed is ok if there is sunlight. Getting the sun in with the arabs is a pipe dream, and china and south america and the snakes in congress.


30 posted on 05/08/2008 11:38:12 PM PDT by machenation ("it can't happen here" Frank Zappa)
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To: tennteacher
Aren’t you cute.

yitbos

31 posted on 05/09/2008 1:17:33 AM PDT by LjubivojeRadosavljevic
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To: kellynla
"Societies that ignore this kind of signal do so at their own peril."

Uh, hello? Democrats in the house and senate?

We're doomed...

32 posted on 05/09/2008 2:48:23 AM PDT by Caipirabob (Communists... Socialists... Democrats...Traitors... Who can tell the difference?)
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To: Terpfen

Yep. Why read further?


33 posted on 05/09/2008 3:31:30 AM PDT by Loyal Buckeye
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To: kellynla
..Oh com’on everybody, the dems, repubs in the senate/congress, and their families, many of whom own oil stocks and love the increased values and high dividend pay outs, will make sure that the industry they are there to regulate will drill more, will build refineries....Our elected officials and families who are swimming in the stock profits, dividends, will make sure to protect the electorate interests and work with the oil companies to produce and refine more oil so prices can drop.....Yes, I am positive they will do that.
34 posted on 05/09/2008 5:02:17 AM PDT by never4get (We are all born ignorant, but one must work hard to remain stupid)
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To: 1COUNTER-MORTER-68

Ruff!

Top of the mornin’, Marine!

Looks like somebody out there doesn’t like me.
As you can see, I lost a whole lotta sleep over it. LOL

Woke up this a.m. listening to “coast to coast”
Seems there’s a company out there with a gadget that improves gas mileage.
check this out
http://www.water4gas.com

Have a good one!

Semper Fi,
Kelly


35 posted on 05/09/2008 5:12:35 AM PDT by kellynla (Freedom of speech makes it easier to spot the idiots! Semper Fi!)
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To: kellynla
The fundamental reality of oil - and the thing that makes it so attractive to investors in the first place - is that we are using ever more and finding ever less.

The author makes a false statement. Proved Reserves continue to grow at an average faster rate than increasing demands.

In 1980 those estimates said we had 27 years left.

In 1990 those estimates said we had 41 years left.

In 2000 those estimates said we had 36 years left.

In 2005 those estimates said we had 41 years left.

In 2007 those estimates said we had 43 years left.

On average, the petroleum industry meets the rising demand and still adds more to the proved reserves.

http://www.eia.doe.gov/pub/international/iealf/crudeoilreserves.xls

http://www.eia.doe.gov/emeu/ipsr/t44.xls

But oil in the ground isn't the same as oil flowing from wells. The World's Margin of Supply is tight. This prevents producers from taking advantage of high prices and putting more oil (immediately) on the market. Nearly all of the excess production capacity is held by OPEC, as they are the only ones willing to hold back oil production to raise global prices. And their margin is near a historic low, although Saudi Arabia is completing some expansions projects that will raise it. Recent reports from them state they do not plan to do more (in the near future) once those are completed.

In the near future, Non-OPEC supply is forecast to rise by 0.6 million bbl/d in 2008.

36 posted on 05/09/2008 5:12:49 AM PDT by thackney (life is fragile, handle with prayer)
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To: tennteacher

A suggestion for you. Read the Posting Guidelines of FreeRepublic including:

Don’t jump threads - If you get involved in an argument in one thread, it’s considered poor manners to restart the previous argument in the middle of an unrelated thread

http://www.freerepublic.com/help.htm#guidelines


37 posted on 05/09/2008 5:22:05 AM PDT by thackney (life is fragile, handle with prayer)
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To: balch3

Re: Manhattan style Project...I agree, and I’ve made several posts to that effect.

Still, it makes no sense to kill off our economy, or being held hostage, whilst sitting on relief, albeit temporary.


38 posted on 05/09/2008 5:26:06 AM PDT by papasmurf (Unless I post a link to a resource, what I post is opinion, regardless of how I spin it.)
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To: spokeshave
Build oil refineries on shut down military bases

Unfortunately, refineries are not very productive without being close to crude oil supply pipelines or refined product delivery pipelines.

It is not from a lack of land that new refineries are not being built.

39 posted on 05/09/2008 5:26:51 AM PDT by thackney (life is fragile, handle with prayer)
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To: kellynla
Seems there’s a company out there with a gadget snake oil that improves gas mileage takes money from the gullible who believe you can get more energy out of a system than you put in.
40 posted on 05/09/2008 5:29:03 AM PDT by thackney (life is fragile, handle with prayer)
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To: thackney

Thanks again for the info.

I’m just wondering how much higher fuel prices have to go before the American public tells their congressmen, “Enough is enough with the polar bears; start drilling and start drilling more NOW!”

This is all so silly, here we are, with all the oil and coal reserves and nuclear power technology to be totally energy independent;
and we’re letting a small percentage of “tree huggers” run our economy & way of life in the ground!

John McCain are you listening?


41 posted on 05/09/2008 5:29:08 AM PDT by kellynla (Freedom of speech makes it easier to spot the idiots! Semper Fi!)
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To: kellynla
I’m just wondering how much higher fuel prices have to go before the American public tells their congressmen, “Enough is enough with the polar bears; start drilling and start drilling more NOW!”

I was sure we would have reached that point last year. It is a lot easier for me to understand the oil industry than understand how people in mass will react to it.

42 posted on 05/09/2008 5:30:59 AM PDT by thackney (life is fragile, handle with prayer)
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To: thackney

Thank you


43 posted on 05/09/2008 5:34:24 AM PDT by kellynla (Freedom of speech makes it easier to spot the idiots! Semper Fi!)
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To: kellynla

I like Free Republic, most days at least.

It is a better place when people play nice.


44 posted on 05/09/2008 5:38:08 AM PDT by thackney (life is fragile, handle with prayer)
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To: thackney

IMHO, there will be a “tipping point” or threshold price which will precipitate an unacceptable level of domestic violence.


45 posted on 05/09/2008 5:45:10 AM PDT by verity ("Lord, what fools these mortals be!")
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To: thackney

yep...
unfortunately there are some people out there who are miserable and they aren’t satisfied unless & until they bring others down to their level of misery. As the old saying goes “misery loves company” holds true. LOL

Gotta go

Have a good one

Kelly


46 posted on 05/09/2008 5:47:27 AM PDT by kellynla (Freedom of speech makes it easier to spot the idiots! Semper Fi!)
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To: kellynla

They speculate that oil will reach $200 a barrel by the end of this year


47 posted on 05/09/2008 5:49:20 AM PDT by Cronos ("Islam isn't in America to be equal to any other faith, but to become dominant" - Omar Ahmed, CAIR)
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To: LongTimeMILurker
I agree with all your points:
1) Open all federal lands with oil and natural gas potential for exploration.

2) A Manhattan Project to build new nuclear power plants like nuanced, environmentally conscious France has done.

3) Stop using grain for ethanol production for fuel.

4) Use nuclear power generated for desalination to solve water shortages.

5) Continue to explore and develop alternative energy and fuels, but with the idea that these are long term, not short term priorities.

Also, as oil prices are increasing, US car buyers are now buying smaller, more fuel efficient cars (toyota, hyundai, honda are laughing all the way to the bank) -- and that's a good thing. The overall car industry will give us more powerful, more efficient cars, just like the 70s oil shock did
48 posted on 05/09/2008 5:51:53 AM PDT by Cronos ("Islam isn't in America to be equal to any other faith, but to become dominant" - Omar Ahmed, CAIR)
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To: Mad_Tom_Rackham

nope, it’s not the government, at least not the US govt — it could be OPEC related, but I doubt it, it’s just market forces, pure and simple, no conspiracy theory


49 posted on 05/09/2008 5:53:10 AM PDT by Cronos ("Islam isn't in America to be equal to any other faith, but to become dominant" - Omar Ahmed, CAIR)
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To: AmericanExceptionalist
Admittedly, at this stage of my life, a sector fund is rather risky. That said, however, I have no intention of switching to a balanced fund or an asset-allocation fund--or some other "safe" investment--just now.

When the bubble bursts, and your 401K is valued at 25% of its original value, please don't whine and ask for a gubbmint handout.

50 posted on 05/09/2008 5:55:36 AM PDT by USS Alaska (Nuke the terrorist savages - In Honor of Standing Wolf)
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