Market Talk

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With the Dow Jones Utility index recently placing another new all time high - I'll sit tight once again and dollar cost average. This is once again a correction of a similar pattern we've already experienced several times already this year. If it turns into an October Massacre it will be like looking down a deep well not knowing where the bottom may be. I think Tom is correct when he looks at 1995. Count this gambler in at 100% C fund. Take care.
 
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I can't reach my TSP account, anyone else having problems?

Please check?

Thanks!
 
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Teknobucks,

I read that article over the weekend - my initial thought was can we have a bull run that very few can afford to participate in - it would actually be classic. The bull wants to take as few people with it as possible on the upside - now that most are sitting on illiquid real estate and rates rising. Such a terrible thought. Let'er rip.

bkrownd,

If you notice, Teknobucks has been using his G money to dollar cost average into the C fund on the way down. Picking bottoms are notorious endeavors. Hope you can catch yours to be all in. Take care.

Dennis
 
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A few weeks ago I was planning on waiting for the S&P to hit 1195 before I jumped in It is now 1196; (Fire Sale Post)close enough I am 100% C for tomorrows action hoping for up day,then I will have to decide how long to keep it there. Any suggestions? I am thinking about just leaving 100% C for the next few months or jump between the I and the C based on what the dollar is doing: Dollar down (I) dollar up(C) Life should be that simple.

Jo
 
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Has it hit 900 yet? I'm ready to ride the magic bubble again, sir. :dude:

I like analysis - thanks for the article link. Know of a rebuttal? Oddly, the good times are rolling in my family. I don't see any of us returning to the cash-strapped year 1980 when everybody seemed to be broke. Who are all these nutty people swimming in debt that Suze Orman is always talking to on TV?
 
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Jovarn,

Take a look at the graph of sp500 from 1995 - that's your answer. Now, if you want some I fund you can use your contributions to dollar cost average accumulation and eventually use it as a back up G fund for other purchases. That would give you some flexibility - I think I should take my own advise except my wife owns a hefty position in another international fund, so I have ample exposure. Take care

Dennis
 
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Saudi Storms
As hurricanes batter the American coast and send oil prices up, Al Qaeda is watching, and drawing lessons.

MSNBC.com
By Christopher Dickey
Newsweek

Oct. 3, 2005 issue - The shoot-out earlier this month around a seafront villa in the Saudi Arabian city of Ad Dammam lasted almost 48 hours, and ended only when security forces brought in light artillery. They blasted the opulent home until the roof came down on the people inside. In the immediate aftermath police said they couldn't tell from the charred remains just how many members of "a deviant group" had died in the battle. Finally, with DNA tests, they counted five. Police also found enough weapons for a couple of platoons of guerrilla fighters. The inventory given out by the Saudi Interior Ministry included more than 60 hand grenades and pipe bombs, pistols, machine guns, rocket-propelled grenades, two barrels full of explosives, video equipment, a large amount of cash and forged documents.

It was the documents that really set off alarms. According to a Saudi Interior Ministry statement, they included forged passes to enter "important locations." The Saudi daily Okaz quoted the minister, Prince Nayef, saying the cell—which was linked directly to Al Qaeda—had planned major attacks on some of Saudi Arabia's key oil and gas facilities. "There isn't a place that they could reach that they didn't think about," said Nayef. And their ultimate target was the global economy. Saudi Arabia is the greatest source of oil on earth, with a quarter of known reserves and a proven policy of trying to stabilize prices even in today's volatile markets.

If the incident made few headlines at the time, it's because it ended on Sept. 6, when the United States—and oil traders—were focused on the impact of Hurricane Katrina. Yet precisely because of the shortages brought on by that storm and the damage still being counted from Hurricane Rita, Saudi Arabia is more important than ever to world oil supplies. What's worse, according to several analysts, Al Qaeda knows it. "They're watching Katrina. They're watching Rita. They're watching what it's doing to the United States," says former CIA agent Robert Baer, who has written extensively on Saudi Arabia's vulnerabilities. A few ruptured pipes could be repaired quickly, says Baer, but a concerted attack at several points could bring on the kind of nightmare scenario that U.S. officials have been dreading since the Reagan years, pushing oil prices up from their current prices in the range of $60 to $70 a barrel to well over $100 for weeks or even months.

Since Al Qaeda's campaign of terror inside Saudi Arabia began in 2003, the Saudis have dramatically stepped up protection of their oil installations. Security forces have issued several lists of their most-wanted terrorists, and tracked down or killed most of them. (Four of the five in Ad Dammam were on the latest lists.) Officials have sought to reassure the world that the terrorists are on the run. Anthony Cordesman at Washington's Center for Strategic and International Studies, among others, has backed up that basic analysis.

Yet the cells seem to be replaced almost as quickly as they're taken down. The brother of one of those killed in Ad Dammam, himself a wanted terrorist named Muhammad Abdelrahman Al-Suwailimi, put a voice message on the Web afterward claiming the incident was exaggerated by authorities. He also thanked the infamous terrorist Abu Mussab al-Zarqawi, in neighboring Iraq, for his support. Saudi Arabia now is increasingly concerned about the potential blowback of disintegration in Iraq. "I don't see how the Arab countries are going to be left out of the conflict in one way or another," said Saudi Foreign Minister Saud al-Faisal last week. "I think this is what is going to happen if things continue as they are."

Precisely what the Dammam cell intended to hit, if known, has not been revealed in any detail. But, as Baer points out, Saudi Arabia is a target-rich environment. Certain critical nodes in the general vicinity of Ad Dammam have worried American strategists for years. Past studies suggest a moderate-to-severe attack on the Abqaiq oil-processing facilities, for instance, could cut Saudi output (now about 9.6 million barrels a day) by more than 4 million barrels for two months or more.

Al Qaeda has used suicide boats before. A successful hit against a major offshore loading facility at either Ras Tanura or Juaymah would knock millions of barrels off the market. Baer wrote in 2003 that "a single jumbo jet with a suicide bomber at the controls ... crashed into the heart of Ras Tanura, would be enough to bring the world's oil-addicted economies to their knees." After the one-two punch from Katrina and Rita, it might not take that much.

© 2005 Newsweek, Inc.
© 2005 MSNBC.com

URL: http://www.msnbc.msn.com/id/9468701/site/newsweek/
 
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The October Surprise
It's your home heating bill, 70 percent higher than last year's.
Related in Slate
By Daniel Gross
Posted Monday, Oct. 3, 2005, at 1:58 PM PT

So far, rising gasoline prices have caused only marginal damage to the vast U.S. economy. Lower-end retailers, like Wal-Mart and Family Dollar, complain that high gas prices are cutting into their sales. American Airlines has canceled several flights, and the White House has issued a halfhearted plea for conservation. But while drivers may groan about the high price of gas, they haven't changed their consuming habits drastically—and if my Slate colleague Austan Goolsbee is right, they won't unless the high prices persist for five years.

But high prices for another form of energy are about to brutalize Americans. October signals the beginning of the winter heating season. The high price of heating fuel—a problem that has been hibernating in the spring and summer—is about to become an enormous issue in the northern half of the country.

The price of natural gas, the most popular fuel for heating homes, is rocketing upward, driven by rising demand, relatively stagnant North American supplies, and the disruptions imposed by the recent hurricanes. According to the Energy Information Administration's most recent daily production update, up to 76 percent of the Gulf of Mexico's natural gas production remains off-line. As this chart shows, the price of a contract for November delivery of natural gas has risen 50 percent in the last six weeks, from about $9 per million British thermal units in mid-August to $14 today. Natural gas is vulnerable to such spikes. Because crude oil can be moved around the globe with relative ease, the hurricanes didn't massively disrupt the market for oil. That's not the case with natural gas. Natural gas from the Middle East would have to be cooled to -256 Fahrenheit, liquefied, transported in special ships, and then re-gasified in the United States. The necessary infrastructure is lacking. And there is no strategic natural-gas reserve the government can draw down in times of need.

The cost of heating oil, the price of which is largely a function of the price of crude oil, has been rising as well, up about 10 percent in the past month, according to EIA's weekly report. EIA projects significant further price hikes for both heating oil and natural gas next year, too. The government does have a Northeastern heating-oil reserve that President Bush is thinking about tapping.

As a result, assuming a typical winter and a "Medium Recovery case," EIA estimates that heating costs are going to explode. For the 2005-06 heating season, "residential per-household expenditures" will rise by 71 percent for natural gas in the Midwest, 31 percent for heating oil in the Northeast, and 40 percent for propane in the Midwest. For all of 2005, EIA projects Americans will spend $1.08 trillion on energy, up 24 percent from 2004. That amounts to 8.7 percent of gross domestic product, the largest percentage since 1985.

Heating-fuel prices hikes will have a different psychological and economic impact than rising gasoline prices. For most consumers, rising gas prices are manageable, since people tend to buy gas in $40 or $50 portions. And the price increase has generally been orderly and steady, which gives people time to adjust.

Not so for heating-related fuels. Many people haven't paid heating bills since last winter, and level-paying arrangements (which spread payments out over several months) frequently take a hiatus in the summer. Consumers also purchase heating fuel in larger quantities than they do gasoline. They take delivery of several hundred gallons of heating oil at a time, not 20. Monthly bills run well into triple digits.

For many who live in cold-weather climes, the bite will be more painful than rising gas prices. Many consumers (Moneybox included) already spend more on heating fuels than they do on gas. For urban dwellers, for the carless, and for suburbanites who commute primarily by train, higher gasoline prices haven't been a big deal. But because everybody needs to heat their home in winter, the tax imposed by higher heating-fuel prices will be more far-reaching. Poor people in the Bronx who don't drive will find themselves spending much more on energy than they did last year.

Heating bills are, at least, somewhat progressive. The bigger your house, the bigger your heating bill. This winter, all those people living in 6,000-square-foot McMansions with double-height entryways and steam showers will be shelling out several thousand dollars extra in heating costs. The yuppies and the executive class will get squeezed along with the poor and rural dwellers.

One economic downside of the heating-fuel spike is that it will afflict many of the highest-earning parts of the country, which account for a disproportionate share of consumer spending. This winter, many northerners who shop at Costco and Saks will find that thousands of dollars that would ordinarily be spent on clothes, food, and electronics will instead go to the utility or to the gas company. And the first big bills will be arriving in mailboxes across the Northeast just when retailers are preparing the circulars for Christmas sales. In mid-September, the National Retail Federation issued its first Christmas shopping season forecast, which was somewhat pessimistic. If energy prices remain high, this is the year the Christmas shopping grinches could finally be right.
 
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