An investment in actual crude oil is basically a bet that the price of oil is going to continue to rise as that is the only way to make money. The price of oil went up over 1000% between the low in the late 90s and the high that occurred in the summer of 2008, so it’s possible to make lots of money in commodities if you have good timing. The biggest issue with high gas and fuel prices has been that it takes the wind out of the U.S. economy which in turn causes a slowdown in consumer spending as well as gas demand. These swings in demand with a fairly constant supply cause prices to move quite wildly which can be seen on a regular basis. After rising over 1200% between October 1998 and July 2008 prices turned around and fell almost 80% in only 6 or 7 months at the end of 2008, so this is not a market for the timid.

Most people are much better off owning an oil stock etf which contains a basket of oil related stocks instead of owning the actual commodity. This is because the earnings of oil companies tend to be less volatile than the price of oil and oil companies can continue to rake in the cash even if oil prices just stay where they are instead of rising. If you look back at comparisons of the price performance between USO the most popular crude oil etf and XLE the most popular Oil Stock ETF you will see that XLE has strongly outperformed USO since it’s inception and this will most likely continue into the future.

USO or even the double oil etf – UCO can be used for trading short term swings in the price of crude oil, but you need to have good timing skills to make money at that game. You can gain exposure to the downside as well by purchasing the ETF – SCO or the ETN – DTO which both designed to rise as the price of crude oil falls. Most of these financial instruments are designed for short term traders and do not work well for long term investors. For longer term investors the return they can achieve from a good oil stock ETF such as XLE is hard to beat.

First and probably most crucial is you’re driving record. If you’ve been involved in your share of accidents, received numerous speeding tickets or had DUI or Leaving The Scene violations your insurance is going to be much more expensive. Many insurers have developed vanishing deductibles or safe driver discounts that kick in the longer you go without an accident claim or ticket.

Next your potential insurer is going to want to know your age. A young driver, whether male or female, will be charged more for insurance coverage because they are a greater risk. The difference in premium between someone age 27 and another age 17 can be as much as 25% with an identical car and driving background. Most companies will start to give you lower rates when you hit age 25 and they may drop even a bit more as you continue to get older.You’ll receive a reduction in your premiums at age 25 and some again at 28. The reason premiums drop as you age is because the older age groups have far fewer accidents than the younger groups.

A third consideration you have to think about is the car you’re driving. If your insurance company is going to have to pay to fix an expensive car or one prone to more accidents or thefts, then the premiums will be higher as well. Insurance companies base premiums on historical losses, so if you have an expensive car to fix or a popular theft target there will be higher insurance premiums. While the number of deaths per mile driven has dropped dramatically over the past 15 years nearly 35%, many of the safety features such as crumple zones have increased the cost of fixing automobiles. As vehicles become more expensive and complex the collision / comprehensive portion of your car insurance premiums will continue to increase.

One thing that I think is important is using the internet to get rate quotes to see what’s available but then talk to a local agent to see if there is anything you can do to improve your car insurance rates. Rod was telling me that several of his clients have saved enough on their car insurance premiums to pay for their home or renters insurance which is equally as important. You have nothing to lose by talking to an agent and you may get a positive surprise.

If you plan on using your brush mower for clearing areas that have thick heavy grass, underbrush and saplings it’s important to make sure it will take the punishment. The first thing to look at is how the mower deck is reinforced since the basic strength of the entire mower is supported by the deck. What I look for is strong support on all 4 sides of the hydraulic motor as well as in the back where it attaches to the skid steer.The most important areas for support are in the center where your power source is attached as well as in the back where the mower attaches to the skid steer. There should also be good integrity along the front of the mower as well and in the four corners but the primary stress will come right around the motor.

I’m sold on using the hydraulic direct drive instead of gear boxes because there is less to go wrong. It should also be mounted on heavy gauge steel plating to reinforce the deck strength. This extra piece of steel along with the rigid supports on all 4 sides will provide enough strength in case you hit rocks or other hard objects with your mower. The elimination of the gear box seems to be a good idea since it’s one less thing that can be damaged by impact or simply by wear and tear over time. Combining the direct drive system with proper brake and pressure release systems can ensure that your mower doesn’t get pushed past it’s structural limits.

If you anticipate using your skid steer mower in adverse conditions even if it’s only on occasion another important aspect is the flywheel. A heavy flywheel allows you to maintain speed through tough spots because it carries greater momentum. If you have to slow down or stop when you get in heavy conditions it may be caused by a lack of hydraulic pressure or a light flywheel. A solid flywheel combined with heavy properly designed blades will make cutting a breeze because of the increased efficiency. I like combining a 250+ pound flywheel with 3 updraft blades instead of two, that seems to be the best combination. I’ve heard the 3 blade design allows you to cover 30% more ground because of the increased surface area of the blades, combine this with updraft blades and you’ve got the ultimate cutting machine!

If you have questions on skid steer mowers or any other skid steer attachments just give Josh Sanden a call at SkidPro – 1-877-378-4642 anytime Monday – Saturday. They are awesome to deal with!

Anyway, the only thing I see that people can do is finding ways to cut their expenses. I’ve already dropped my cable package down to the basic channels, cancelled my home phone and reduced my cell phone plan to the smallest package. I also recently replaced my flip flops with a pair of orthotic sandals in hopes that it will help my hips and back feel better and I can cut down on trips to the chiropractor. So far they seem to be working, I think my back problems may have been partially from not having good support in my shoes!

I Hate Insurance Premiums!

Now I’m looking through my insurance to see where corners can be cut. I was on a site that talks about term vs whole life insurance to see taking the cash value out of my permanent life insurance and buying a 20 year level term would make sense. I’m 45 so in 20 years I will be retirement age and will hopefully be debt free so I won’t need a lot of life insurance coverage.

Speaking of debt, the other place where I can see there is lots of savings to be had is the amount of credit card interest I pay. It doesn’t seem like a lot when you see your monthly statements but when I added up each of those monthly chares for all 3 of my credit cards it was a shocking number ($1245)!!! I did some online research and uncovered a technique on how to get out of debt for using balance transfer offers and focusing on paying down your smallest balance first. It’s similar to the debt snowball plan that I’ve heard on Dave Ramsey’s show but it takes it a step further. By getting the interest costs as close to zero as possible it frees up lots of cash that can then be used to pay down debt. I have a friend who used this technique to go from $20000 in credit card debt to zero in just two years. That’s pretty fast when you think about it.

Anyway, since my wages are stuck for now I’m going to keep driving my costs down until I have enough free cash flow to pay off my debts. By getting rid of expenses it will be the equivalent of a 10-15% pay raise and I’m not missing any of the things that I cut. I’ll give you an update on my progress in a few weeks!

The other aspect is pure manipulation as Goldman Sachs has gone from bilking mortgage bond buyers to screwing commodity traders. A few weeks ago they kept announcing that crude oil had topped and they were bearish (undoubtedly they were short a rising market) then after the market dropped several dollars in one day they came out with bullish predictions. In other words, they used the drop that they helped to cause to buy crude oil at lower prices.

It doesn’t take much buying or selling to move crude oil prices quite dramatically. The market is much smaller than equity or bond markets and the amount of excess supply is quite low. When there isn’t much excess supply available speculators can easily influence the equation.

There are rumors in the marketplace that the 2008 run up to $140+ was caused by just a few traders who held large speculative positions and colluded to influence prices. I’m not sure if that’s exactly true but it certainly is possible. A few big players can get the market moving and the other momentum players (hedge funds etc) jump on for the ride. A similar thing happened to silver a couple months back and it moved 35% in just a couple weeks before collapsing the other direction.

Bernanke has held interest rates so low for so long that speculators have almost no cost of capital. It has paid handsomely to trade 0% cash for gold, silver, crude oil and other commodities. A little air has come out of the bubble as QE2 winds down, but until there is some cost of capital the oil and commodity markets remain vulnerable to up side pressure. We who purchase food and gas will continue to pay for this speculative excess. However, it’s probably less painful than the deflationary alternative that Bernanke is desperate to avoid.

By the way, I had a question for my insurance friend as well. How much is car insurance for my 16 year old daughter who just had an accident and got ticketed? The answer to that was even worse news than the high gas prices!

Choice A: Reduce our spending and cut entitlements

Choice B: Continue devaluing the U.S. Dollar to inflate away our debts.

Choice B is the most likely outcome because on the surface it doesn’t require anyone to sacrifice. However, why do you think you are suddenly paying $4 for a gallon of gas? Why does a full cart of groceries that cost $100 in 2000 now cost $200?

Many economists are predicting $10 gas and $5 bread in the near future if we don’t get our Federal Budget Deficits in order. There is a very strong correlation between out of control federal deficits, a weak dollar and the soaring cost of basic necessities.

In fact if you look at the charts below you can see the direct correlation between a falling dollar and the rising prices of Gas and Groceries!

Here is what wholesale gas prices have done over that same period!

Gold is also soaring to new all time highs as people flee from paper currencies into Gold and Silver. In fact, the leveraged Silver ETF – AGQ was the #1 performing ETF of 2010 and is #1 again in 2011!

All Major Commodities (represented by the CRB Index) are headed back to all time highs and this is the “Grocery Indicator”.

Why is the dollar so weak and bound to get even weaker? Take a look at the U.S. Debt Clock. Pay special attention to the numbers at the bottom: U.S. Unfunded Liabilities. It’s already over $1 million per U.S. taxpayer. So if you pay taxes you owe $1 million to pay for Medicare, Social Security and Health Care.

Who’s to blame? Congress. I suggest you call or write each of your congressional members. If we don’t hold them accountable then it is just as much our fault as it is theirs.

Why is congress to blame? Charlie Reese a former reporter from the Orlando Sentinel did a good job of explaining it in one of his editorials. It’s an older article but even more relevant today than when it was written.

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Politicians, as I have often said, are the only people in the world who create problems and then campaign against them.

Everything that is wrong in Washington is a problem created by Congress. Too much bureaucracy? Blame Congress. Too many rules? Blame Congress. Unjust tax laws? Congress wrote them.

Out-of-control bureaucracy? Congress authorizes everything bureaucracies do. Americans dying in Third World rat holes on stupid U.N. missions? Congress allows it. The annual deficits? Congress votes for them. The $14 trillion plus debt? Congress created it.

To put it into perspective just remember that 100 percent of the power of the federal government comes from the U.S. Constitution. If it’s not in the Constitution, it’s not authorized.

Then read your Constitution. All 100 percent of the power of the federal government is invested solely in 545 individual human beings. That’s all. Of 260 million Americans, only 545 of them wield 100 percent of the power of the federal government.

That’s 435 members of the U.S. House, 100 senators, one president and nine Supreme Court justices. Anything involving government that is wrong is 100 percent their fault.

I exclude the vice president because constitutionally he has no power except to preside over the Senate and to vote only in the case of a tie. I exclude the Federal Reserve because Congress created it and all its power is power Congress delegated to it and could withdraw anytime it chooses to do so. In fact, all the power exercised by the 3 million or so other federal employees is power delegated from the 545.

All bureaucracies are created by Congress or by executive order of the president. All are financed and staffed by Congress. All enforce laws passed by Congress.

All operate under procedures authorized by Congress. That’s why all complaints and protests should be properly directed at Congress, not at the individual agencies.

You don’t like the IRS? Go see Congress. You think the Alcohol Tobacco and Firearms agency is running amok? Go see Congress.

Congress is the originator of all government problems and is also the only remedy available. That’s why, of course, politicians go to such extraordinary lengths and employ world-class sophistry to make you think they are not responsible. Anytime a congressman pretends to be outraged by something a federal bureaucrat does, he is in fact engaging in one big massive con job. No federal employee can act at all except to enforce laws passed by Congress and to employ procedures authorized by Congress either explicitly or implicitly.

Partisans on both sides like to blame presidents for deficits, but all deficits are congressional deficits. The president may, by custom, recommend a budget, but it carries no legal weight. Only Congress is authorized by the Constitution to authorize and appropriate and to levy taxes. That’s what the federal budget consists of: expenditures authorized, funds appropriated and taxes levied.

Both Democrats and Republicans mislead the public. For 40 years Democrats had majorities and could have at any time balanced the budget if they had chosen to do so. Republicans now have majorities and could, if they choose, pass a balanced budget this year. Every president, Democrat or Republican, could have vetoed appropriations bills that did not make up a balanced budget. Every president could have recommended a balanced budget. None has done either.

We have annual deficits and a huge federal debt because that’s what majorities in Congress and presidents in the White House wanted. We have troops in various Third World rat holes because Congress and the president want them there.

Don’t be conned. Don’t let them escape responsibility. We simply have to sort through 260 million people until we find 545 who will act responsibly.

Silver is definitely the stronger of the two metals here and at 38 to 1 the Gold / Silver Ratio is the lowest since I was in high school (1983) and appears as if it could be headed to an extreme. This ratio has gotten down into the teens in 1920, 1968 and again in 1980 so it’s very possible that it could happen again.

My interest remains in the Silver ETF (SIVR) as well as the silver mining etf (SIL) both of which have been star performers over the past 7 months. I’ve also been watching the double silver etf (AGQ) but at $220 per share it’s a little out of my league. I expect that silver is going to get more volatile in the coming weeks, it’s been more muted on the downside than normal. In the past silver always had violent downward corrections even while in a bull trend. The setbacks have been unusually mild the past several months which has caused me to remain very bullish. If an overbought market can’t go down, that is usually an indicator there is still lots of room to the upside.

Another noticeable trend was the dominance of Car based ads, it must be a sign that the market for automobiles is turning around!

2011 Highest Rated Super Bowl Ads

Doritos “Pug Attack”
Bud Light “Dog Sitter”
VW “Darth Vader”
Doritos “House Sitter”
Pepsi Max “Love Hurts”

At the other end of the spectrum Hyundai (which had an incredible 2010 as far as U.S. sales were concerned) had two of the worst rated ads of the evening. VW had the highest rated car ads with Darth Vader and the Beetle ads.

2011 Lowest Rated Super Bowl Ads

Hyundai “Good Enough”
Hyundai “Compacts”
GoDaddy.com “In The Buff”
Stella Artois “Brody Loves Stella”
Mini Cooper “Cram It In The Boot”

These ratings are based on the USA Today Super Bowl Ad Meter.

Source: USA Today

With that said, yesterday silver tried to rally but was stopped dead by the 20 day simple moving average. This morning it broke the 50 day sma and is currently down another dollar. Assuming we close below the 50 day the next major moving average would be the 100 day (20 week moving average) which comes in just below $26. The 200 day sma is all the way down at $22 and that’s the one that silver bounced along last summer, so $22 would be the ultimate buy area. I really doubt there is a chance at getting to those levels however.

Gold on the other hand is currently testing it’s 100 day or 20 week simple moving average. If this level is broken there is a possibility that it could get close to it’s 200 day sma which currently sits at $1280. I think most traders would love a chance to buy gold in that area. For gold the major uptrend won’t be violated unless we take out the $1000 level. With the current level of money printing and bailouts worldwide I’m not overly concerned about a bear market in gold at this time.

First of all, I do understand that when the economy has been weak people tend to pull money from anywhere they can so I’m sure that’s why they increased the unqualified withdrawal penalty from 10% to 20%. After all, this money is supposed to be used for health care not for paying off credit card balances.

The one that really irritates me is the change in OTC drugs. I’m not someone who runs to the doctor constantly for colds etc. I tend to take care of myself and use preventive measures. Initially I was disappointed that you can’t use HSA funds to pay for any vitamins or supplements. In my opinion, it makes much more sense to allow people to buy Vitamin D instead of running to the doctor once you are sick. But I can see where supplements could be abused and it’s hard to draw the line on which should qualify.

OTC Drugs though seem like they should be treated like prescription drugs. If a drug was ever “prescription only” but is now available over the counter, it should qualify without a prescription. I’ve been using Tagamet and Zadator (allergy eye drops) for several years, both were originally prescriptions but have since become OTC drugs. Now thanks to the 2011 HSA Rule Changes I have to go back to my doctor and get prescriptions for them again? Wow, with over 10 million HSA accounts in existence it seems like this will be a boon for doctors! Who designed these new rules anyway? The AMA?

I fully understand that you don’t want people abusing their HSA funds to buy all kinds of items that don’t directly relate to health care, but at the same time it’s not right to penalize those of us who are being responsible for our own health care. To cut back the benefits allowed through the HSA plans while simultaneously giving 30-40% of Americans free health care just seems like a recipe for long term disaster.