The movie business

I don't think the economy is doing well, though the official numbers claim something different. I think unemployment is higher and revenue is lower. I also believe that we are either in a recession or entering one. One spot in the economy that does seem to be doing well is the movie business. So far this year, ticket sales and income are higher than at any point in the past several years. If this trend continues, the movie business might have it's best year ever. It helped that Start Wars VII was a monster hit, but there have been some notable hits in the new year as well. If the economy is not doing well, should that not be reflected at the box office? Maybe, but it is also true that when things are not going well people like to go to the movies to help forget their problems. I think that is why the movie business is doing well. It also helps that there have been some descent movies lately.

What do you think?

The economy

The numbers for the economy make it seem as if things are fine. Unemployment is low, the economy is adding jobs, and even Wall Street seems to have rallied. I personally do not believe our economy is doing well. I see more and more stores closing. I see fewer cars on the road. I also hear more and more stories of people I know getting laid off. So, either the economy in my area is suffering but the rest of the country is doing well. Or, the numbers are just fantasy and the reality is our economy is a mess. Did we ever really have a recovery?

What do you think?

Gasoline update

I wrote a few days ago about the price of gasoline, so I will not rehash what I wrote. I just want to add that the price keeps falling here in California. I paid $2.08 a gallon yesterday. Prices have not been this low since the great recession in 2008-2009. If the price continues to fall it might go below $2, which would be awesome for me. Unfortunately it is more bad news for the energy sector. If this is not an indicator that we are in a recession, I have no idea what else it could mean. How else could we have gas so low unless demand has dropped of as a result of an economic slow down? In the mean time, I will enjoy the savings at the pump.

What do you think?

The price of gasoline

I just filled my gas tank and was pleasantly surprised. Gasoline here in Southern California is now $2.15 a gallon. we have not had gasoline this low since the great recession. In other words, it has not been this low in 7 or 8 years. I actually filled my gas tank for a little over $15. How awesome is that? So the price of oil dropping like a rock is fantastic for me at the gas pump. But what does it say about the economy? I think gasoline and oil are telling us that things are not healthy in the economy. If the economy was healthy, then why is gasoline dropping so much? Why is oil dropping so much? Yes there is a case to be made about overproduction in oil. But does that account for the drastic drop in prices? I don't think so. The only thing that would account for prices dropping this dramatically is a slowdown in the economy. In other words, there has been a drop in demand which has forced prices to follow. I look at gas and oil as a canary in the coal mine. And the canary has just died. It's great for me at the gas pump, but I think things are not going to turn out so well overall.

What do you think?

Immigration

What do I think I'm immigration? My mom and dad are immigrants. They came from Argentina legally in the 1950s. Then they became citizens of the United States. Finally, they renounced their original citizenship in Argentina, just because they were so proud to be Americans. We are a nation of immigrants. That's what makes us unique and special. Yes we are free, yes we have a wonderful constitution, and yes it is all about liberty. But, immigration is also part of our story of success. That is, legal immigration is part of the story of our success. In the past we basically turn a blind eye to illegal immigration. We did so because frankly, we could afford it and we needed the cheap labor. Today though, we can no longer afford illegal immigration. We cannot absorb millions of people who have no skills, low education, no assets, and basically have very little to offer to our economy. We can no longer be the solution to poverty for the rest of the world. If we are to keep our economy healthy, we must control our borders. We must make sure that the only people who are immigrating to our country are the people we allow. It is a matter of saving our economy, our way of life, and the future for our children.

What do you think?

Big trouble in Brazil

Brazil is a beautiful country with many rich resources. Unfortunately it is in big trouble. Retail sales are down 11 of the last 13 months. Thousands of companies filed for bankruptcy last year. Unemployment is high and climbing higher. Add to that the outbreak of the Zika virus and you can see that Brazil is in big trouble. This summer Brazil is scheduled to host the summer olympics. Can it afford to do so? Will they contain the Zika virus before the games begin? Will the games themselves be affected? It is going to be interesting to see what happens in Brazil. I think the rest of South America is in for the same fate. How will this affect the world economy and specifically the U.S. economy? We will have to wait and see.

What do you think?

Oil production news

It was announced today that Russia Saudi Arabia will be freezing oil production. I am not sure exactly what that means, but at least it sounds like some good news for oil. The price of oil has been in a free fall for a while. Though this has been good news at the gas pump, it is been horrible news for the oil industry as a whole. With oil hovering around $30 a barrel, the oil industry has been decimated. This is especially true hear in the United States. Thousands of workers have been laid off, and we are just beginning to see a wave of bankruptcies throughout the industry. With this announcement from Russia and Saudi Arabia maybe we have seen the bottom in oil prices. Unfortunately for the economy here in the United States it is too late to keep us from what I believe will be a severe recession. Though this is positive news, and we will see a rally in the stock markets today, it is too late for the oil sector.

What do you think?

Moving jobs to another country

There is an article on the internet about an air conditioning company that is moving their manufacturing from the United States to Mexico. They are doing this because they believe it is the only way they will remain competitive. Is it a good move? If the manufacturing will be of the same quality, then of course it is. The reality is that it just cost too much to make things in the United States anymore. Also, you have to deal with the diminishing quality of the workforce. We no longer have the quality work ethic we had 50 years ago. Talk to any business owner and the biggest problem they have is finding quality employees. Are there better employees in Mexico? You know, I personally don't think so, but at least they are cheaper and that is what the company needs. This is another reason why we are going to have a very difficult time over the next couple of decades. Not only are there going to be fewer and fewer jobs because of the digital revolution. There will also be fewer and fewer jobs as manufacturers take their manufacturing to other countries because frankly, it's just cheaper. Things are going to be very interesting over the next 20 years.

What do you think?

Oil disaster

The price of oil dropped to $26 a barrel today. I remember predicting a few months ago that the price of oil would drop below $40 a barrel and that would be horrible for the economy. Here we are at $26 a barrel and it is a total disaster. Oil related businesses are starting to lay off well paid workers by the thousands. Many of the businesses are in financial crisis and I'm sure we will see a whole slew of bankruptcies and the near future. Unfortunately oil may go even lower. There are reports that storage facilities are just about full and they might have to turn any new oil from their facilities. If and when that happens oil will drop even further. Are we ready for oil to be lower than $20 a barrel? I personally like paying less for gasoline. But, I do not like seeing the destruction of one of the most productive sectors of our economy. This drop in price is going to have negative ramifications for many years to come. if you are in any way involved in the oil industry buckle up it's going to be a bumpy ride. Actually I think that is the wrong analogy. I actually think the oil industry is like the Titanic on a collision course with an iceberg.

What do you think?

The debt monster

One of the biggest problems we have in our nation today is the amount of debt we have accumulated. The amount of debt that we have in our nation is staggering. If you add up what the federal government owes, what the state and local government owe, what corporations and businesses owe, and what individual and families owe, the amount is so immense it blows the mind. It is in the many trillions of dollars. I would actually do the math for you, but it's so large that doesn't really matter. In fact, I think it's so large that I doubt it will ever get paid back. So what is the implication? The implication is that essentially we are technically bankrupt. In other words, we are broke as a nation, and as a people. The other conclusion I come to is that the next few years are going to be difficult to say the least. This debt monster that has been created will wreck havoc and it is going to be ugly.

What do you think?

A war over oil is brewing

I think there will be war in the middle east, and soon. Yes, it will be over oil, but not in the way most would think. I believe there will be war in the middle east to push the price of oil higher. Why? Because if oil stays as low as it is, most middle east countries will go broke and have massive civil unrest as a result. Oil is the life blood to the middle east (and several other oil producers like Venezuela and Nigeria). Without substantial revenues, most oil producing countries can’t provide all the subsidies, services, transfer payments they give their citizens. When that happens the citizens will revolt and riot threatening the ruling elites. That will not be allowed and war is the only option left to the elites to safe their positions. So war is brewing and will boil over. And that will probably be sooner rather than later.

What do you think?

Is oil the next sub-prime mortgage debacle?

As I look over all the stories about the price of oil I was surprised to find out how leveraged the industry is. What happens if most of the loans to oil related companies are defaulted on? What happens if many of the oil related companies file for bankruptcy protection? What kind of exposure do banks have to these loans that were once “risk free” and are now basically “junk”? I think this all could turn out to have a major impact on our economy just as the debacle with sub-prime mortgages had in the last financial crisis. As the price of oil stays low (or goes lower) we can expect a wave of defaults and bankruptcies across the oil industry that will have a serious negative impact on banks and other financial institutions. I think we can see another “Lehman” event occurring in the near future all because the price of oil has fallen so low. How would have ever thought that this could happen? Oil was supposed to be risk free. Maybe nothing is risk free.
What do you think?

Our economy is in serious trouble

I just discovered an important truth. Supper low oil prices are a disaster for our economy. Let me explain. The energy sector is one of the most important parts of our economy. If the energy sector is healthy (making a good profit), then our economy is doing fine. Oil and natural gas account for about 8% of the U.S. economy. It is over a $1 trillion-dollar industry. Not only is oil and gas one of the largest sectors of the economy, it is one of the largest employers and one of the largest tax and fee paying segments. So when oil and gas are hurting, it has a direct impact on our economy. Yes, high oil prices hurt the economy, but supper low prices are even worse. With oil under $40, the oil and gas sector is going to get hit hard. With it will come a huge hit to our overall economy that very few seem to notice.

I like lower gas pieces (though they have not been all that low in California), but not when it starts costing profits, jobs, and tax revenue. I oil and gas remain this low, buckle your seat belts, this is going to get ugly.

The Economy

On 12-12-14 I wrote: "In 2008 oil fell by $100 a barrel in 6 months (a 75% drop)! If oil follows the same path we could see oil at close to $30 before it stops falling. Now that sounds unlikely, but it has happened before, so why would this be different? What is also interesting is that stock prices eventually followed the price of oil. The S&P 500 fell from 1560 to 666, a fall of about 60%. So we could see stocks fall by as much as 50%. That would put the S&P 500 easily below 1000. So here is what I am predicting. Oil will fall below $40 and the S&P 500 will fall below 1000. Unfortunately I can’t put a date on it, but I would think that within six to nine months to be reasonable. Wow, things are going to get ugly."

That was over a year ago and maybe my prediction is finally coming to pass. Oil is well below $40 and the S&P 500 has had it's worst first week of trading of the the year ever. With the S&P 500 closing at around 1900 today, there is a long way to go. It could get very ugly this year.

What do you think?

Is it time to get out of California?

Congestion and urban sprawl are at their worst. Taxes and governmental fees have never been higher. Crime is increasing. The school system gets worse every year. There are fewer and fewer good paying jobs. Prices keep going up and the cost of living is one of the highest in the nation (and probably the world). Gasoline is expensive. Electricity is expensive. And now with the drought, even water is expensive. Yes the weather most of the year is terrific and the laid back California lifestyle is great, but is it enough? I am starting to think it's time to get out of California. Things are getting worse and the future does not look very bright. In fact, it is staring to look bleak. Thanks to miss-investment, liberal and socialistic policies, unchecked immigration of all sorts, miss-management, cronyism, labor unions, and just plain bad luck, the future of California does not look to be better than the past. In fact, they might get a lot worse. Yes, I think it's time to get out of California before it is to late and everyone and their grandmother is trying to get out.

What do any other California residents think?

Tax rant

I did my taxes this past weekend. Like usual, I had to pay extra even though I don't take very many deductions. That was expected. What I did not expect was it to be way more than I usually have to pay. My wife and I are both teachers and we make good livings here in California. Over the last 10 years we have consistently made a bit more every year (even during the cuts that happened after the last recession). But, all the increase has gone to pay for taxes and health insurance. Our take home pay has not increased at all in 10 years! This year we are on track to bring home less for the first time! This is so infuriating. The more we make, the more we pay. Now I don't mind paying for the things that make all our lives better (clean water, power, good roads and schools, fire and police, etc…), but at some point it has to be enough!

At this point it is very tempting to file for bankruptcy, have my wife stay home from work, and move to another state where there is no state income tax. I might not have that much less after I pay all my bills!!!!

What does that say about the state of our economy that when you make more money, and you end up with less? Why bother working harder? Why bother seeking to make things better? Why bother going to school to make yourself more valuable? There is no incentive to become more than you are.

Is anyone else in this situation? What are you doing about it?

The Economy - Stocks

Stocks were down considerably yesterday. So far stocks have been down for the first two trading days of 2015 (and are down thus far today). The big news though has been oil, which is still falling. Oil is now bellow $50 and still falling! Lower oil prices is good news for those of us who do a lot of driving (and anyone else who needs a break in gas prices), but the sudden collapse is not good for the rest of the economy. Just today US steel announced that it is idling two steel plants and might be laying off hundreds of workers all because of the fall in oil prices. Yes, oil was too high, but the high prices were driving a boom in everything related to the oil business (and many other sectors of our economy as well), which included a lot of great paying jobs. Now the layoffs and idling will begin, which will spread across the economy and cause a recession. The last thing we need right now is a recession. If the price of oil stays below $50 for any prolonged period of time (six or more months) things will get ugly. I think these down days on the stock markets will not be our last.

Economy - Oil!!!

Oil was down even more today. It looks like it ended the day at about $58 a barrel. Oil was as high as $107 earlier in the year. So the price has collapsed by about 50%. It is interesting to note that in 2008 oil fell from $140 to $35 by the end of the year. Could we be seeing a similar occurrence? In 2008 oil fell by $100 a barrel in 6 months (a 75% drop)! If oil follows the same path we could see oil at close to $30 before it stops falling. Now that sounds unlikely, but it has happened before, so why would this be different? What is also interesting is that stock prices eventually followed the price of oil. The S$P 500 fell from 1560 to 666, a fall of about 60%. So we could see stocks fall by as much as 50%. That would put the S&P 500 easily bellow 1000. So here is what I am predicting. Oil will fall below $40 and the S&P 500 will fall below 1000. Unfortunately I can’t put a date on it, but I would think that within six to nine months to be reasonable. Wow, things are going to get ugly.

The Economy - Price of Oil

I love going to get gas. The price just keeps falling and it is so nice to have a few more dollars left in my pocket. Unfortunately, as I have pointed out before, falling oil prices are good for consumers, but not so good for producers. As I write, domestic oil producers are announcing job cuts, reduction in production, and a curtailing of future oil projects. This is especially the case for shale oil producers who need oil to be above $70 to make a profit. Now I am not a fan of the oil companies (as many others), but they have become the driving factor in the current economic recovery (if you even believe we ever had one). If you take away the jobs and money infused into the economy by the oil producers, you can kiss any hopes of a sustained recovery away. If the price of oil stays below $70 for any length of time (six months or longer) we will have serious repercussions in our economy. Hopefully oil prices will settle at about $75 a barrel and we will have some stability. If not, hold on because things can get ugly.