Chris B

Tough Times for Dividend Investors

Dividends are being cut because they don't make business sense right now.

Today's "dividend aristocrats" are increasingly the companies who chose to take on (or maintain) debt at ~7-10% to pay dividends to their investors, who are in turn earning 2% on those dividends in money market and bank accounts. Those investors are doing the equivalent of borrowing from the bank to earn interest in a savings account.

That math just doesn't compute for me.

Winners and Losers in a Democratic Administration

That's a valid point frflyer. The oil crisis of the early 70's resulted in rising fuel economy in US vehicles well into the 80's, as well as the 55 mph speed limit, which saved massive amounts of fuel.

However, the latest oil price spike was no 1974. $4 gasoline only lasted for a couple of months rather than years, resulted in no real shortages or rationing, resulted in few conservation measures, then returned to levels last seen in the heyday of the Chevy Tahoe as the US economy collapsed (cause or effect? You decide :).

Memories of this event might last a couple of years. But the pattern again and again is that US consumers eventually relapse to the land barges they love when gas gets cheap. And voters demand that 70mph speed limit.

The one thing Obama could do to change this dynamic is to enact a permanent fuel tax similar to those in Europe (probably with offsetting income tax breaks). The Republicans living in the exurbs would roast him for doing this, so it will never happen.

He could also push through the development of light rail in all major and medium-sized cities. However, early indications show that those funds will be allocated to bailing out Detroit instead. What vision!

Overall I agree with your points about the true cost of energy. Dead soldiers, pollution-related disease, trillions in war expenses, and the arming of our enemies are never counted in the price per barrel quote.

Winners and Losers in a Democratic Administration

I don't know. With gasoline now selling for $1.99 (!) and natural gas following suit, I suspect that the political motivation to push green tech will soon evaporate in favor of other priorities. It will be much like the 90's, where despite Dems in Congress and the White House, low fossil-energy prices crushed the development of solar, wind, hybrids and electric cars. When political wishes and economic reality collide, guess who wins. Those dreaming of a Green Works Progress Administration in an era of $2 gas might consider just how speculative such an idea is.

Of course, if Chindia fails to implode and continues to grow - then long-term all bets are off. If the bubble-era warnings are true, they will soon gobble up energy and commodities faster than they can be produced in the world market. In this scenario, we will have cut our investment in green tech just in time to get nailed with commodities bubble part 2.

Maybe that's why OPEC takes their profits in spurts rather than consistently. They bankrupt each generation of green tech companies before they can get a toehold in the market, guaranteeing continued dependence on their product.