Carlos Lam

China Stockpiles TIPS, Anticipates Commodities Bubble

If the Treasury is selling more TIPS to satisfy Chinese concern about consumer/commodity price increases, then Sec'y Geithner is essentially exchanging a fixed-rate mortgage for an ARM. In short, the risk of consumer/commodity price increases is being shifted from the lender (China) to the borrower (the U.S. taxpayer). This is not a welcome development.

The Cheap Gas Dilemma

A minimum price (i.e. price support) for any industry (whether it be agriculture or petroleum) only serves to misallocate capital. More importantly, isn't it immoral to force consumers via coercion (I assume the price support you speak of would be imposed by the government) to pay a certain amount greater than the true supply-demand price of a commodity? If a price floor can be dictated for oil, then why not demand it for computers, cellphones, and consumer electronics, all of which have decreased in price over the years?


On Feb 02 11:04 AM yaj strebor wrote:

> Wouldn't it make sense to have a minimum price for crude oil ( for
> the sake of argument $2.50 per Bbl)? If the market price is below
> $2.50, the difference could be put in a trust fund for bridge and
> roads infrastructure or even to grow the NPR. If mkt price goes above
> the benchmark, of course the market price would prevail. The petroleum
> industry would be able to fund long term projects without the fear
> of low prices during the the buildout and payout periods and the
> auto industry would have a better grasp of what models to make and
> how many to produce.

The Cheap Gas Dilemma

After the spring/summer 2008 debacle that was $4+ per gallon gas prices, I came up with a hedge when gas prices collapsed:

1. I purchased a few tote tanks off of craigslist
2. I filled them with gasoline and added enough Sta-Bil to keep the gas good for two years or more
3. I placed them in remote parts of a few buddies' acres in exchange for doing some extra work for them

When the cost of the tote tanks, gasoline, and Sta-Bil was added together, my net cost per gallon was about $1.70. The carrying costs are practically nil, as I check them out on my way home from work a few times a month. When gas prices go above $3 in the next year or two, I'll use gas from my own "strategic reserve." Unlike buying UGA, I need not worry about transaction costs, capital gains, or timing the market perfectly. Moreover, the gasoline is conveniently and readily at hand. I realize that this is akin to taking actual delivery on futures contracts, but I have to drive 50+ miles a day for my work, so gasoline is a rather large expense for me. The only downside: I've only got enough gas for about 1 year or so.