February 23, 2010

Rising gas prices...

Why are gas prices rising?  The US inventory of oil is full (the stockpile we keep full in case of an emergency) and with unemployment being high - we are not consuming as much oil as usual.  But unfortunately, gas prices are still rising.  One reason is the value of the dollar is declining...the value of oil is based on the not-so-mighty dollar - so as the dollar the declines, the cost of oil goes up.  Another reason gas is going up is because China, India, Brazil, Russia are economies that are upcoming and growing faster than the US economy.

Because of this I am investing in commodities for right now...mostly oil companies.  Why?  Because if you take a look at the 1st yr target goals for these companies, they all have very high estimates.  For example, Exxon Mobil is trading at $65/share - but their target for the year is set at $78/share (potentially a 20% return)!  Chevron is trading at $72/share - but their target is set at $86/share (potentially a 19% return).  The list goes on....maybe the oil companies have some insight that we may not know of?  I could be wrong.  The oil companies could be wrong.  But if we're both wrong at least I'll still get close to 3% in dividend returns.  And I doubt the oil companies will need a bailout anytime soon.  So we'll see...


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