Are Gas Prices Really High? And, A Market Update

The easiest thing to complain about seems to be rising gas prices.  We see oil prices at record highs reaching about $115 per barrel.  You hear talks of putting big taxes on oil companies because their just fat cats.  Also, it has to be the president’s fault, right?  Can’t somebody do something about these high prices?  I talk to people selling their trucks and cars to buy a Prius.  If they would stop and do the math, they would often see it doesn’t make sense financially, but it makes them feel better.  I’m not here to give you the solution to our rising fuel costs.  I just want to see are gas prices really high?  So, I did a little research. 

How many of us really look at our monthly expenditures to see if gas, or any other expense for that matter, is rising as a percentage of our total expenses.  I do but I’m a little OCD and a number cruncher.  We know prices for most things are rising, but is gas rising faster than anything else?

So, I whipped out my handy dandy Bloomberg machine and went back to 1965 which is almost as far as this data goes back.  You can see from the chart above that gas expenditures as a percentage of total expenditures stands at around 4%.  But, how does that compare historically?  This chart tells me a couple of things.  First, we enjoyed about 20 years (from 1980 to 2000) of a decline.  In 1980, gas expenditures was over 5% of our total expenditures each month.  It consistently dropped to under 2% in the late 1990s.  But, the reason you hear so much complaining is because we’ve had a sharp increase in recent years.  Your exenditures on gas each month has doubled as a total of your total monthly bills just in the last few years.  That is painful.  But, we have to look at the average and since 1965, the average is about 3.2%.  So, yes, we are above average but it’s not 10% of our monthly budget as you’d be lead to believe by watching the nightly news.

The bigger issue for me is the simple fact of prices rising and how do you and I not fall behind.  I’ll have more in future posts but basically it’s working in an industry that isn’t being left behind, investing in assets that keep up with inflation such as commodities and international stocks. 

Market Update

I’ve had some recent comments on the site asking is foreign money coming into this market and should we be getting rid of our shorts.  For the record, I haven’t made any moves recently.  I have several longs, a lot of short, some commodity related issues, and a lot of cash still.  I’m seeing my Crazy Investor Indicator reaching new highs meaning too much confidence.  This coincides with the e-mails and comments on the site about feeling nervous keeping shorts.  You can trade around in this market but the internals remain weak.  I’m seeing less and less stocks making new highs, a lot of stocks now in downtrends, low volume, low quality of volume.  So, why are prices rising?  The panic and fear over credit markets appears to be behind us, earnings haven’t been just awful, and we’re seeing a rotation out of commodities and into general stocks.  But, I’m still not seeing fresh new money coming into this market.  Markets can keep going up with bad internals for some time which is why I’m still positively correlated with the markets.  But, there are red flags all around me.  So, be very cautious. 


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May 2008
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