Lazy Man and Money

State of the Economy

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Most days, I try to avoid watching CNBC. I’m weird in that I often find it entertaining. I avoid it because I often get the feeling that I’ll be able to time the stock market. Yesterday, I couldn’t resist temptation and I flipped on CNBC for a few minutes.

The Price of Oil

The price of a barrel of oil jumped over $140. It seems like yesterday that people were wonder if oil would top $100. It came close for a while and would dance between $90 and $95. I expected $140 to happen at some point. Like most people, I just figured it would take a good 3 or 4 years.

As much as I wish we didn’t have to more than $4.00 for a gallon of gas, I’m extremely happy that this is spurring people to buy cars that get more miles to the gallon. Maybe I live in an idealistic world, but perhaps people will realize that it’s not so bad and make other cuts in their spending.

The Price of General Motors (NYSE:GM)

If you missed the news yesterday General Motors hit a 53-year low. For those unfamiliar with what that means, CNBC anchor Mark Haines put it best, “If you bought a share of General Motors 53 years ago, in 1955, you would not have made any money. In fact you would have lost a lot due to inflation.”

Think about that for a second. I realize that car companies have been put through the ringer for quite some time. However, I can’t imagine a company that my parents have grown up with to not grow shareholder value their entire lifetime. I picture what it might be like to crawl though an attic. There you find an old dusty box. Inside some long-lost shares stock certificates. You’re in luck! The company still exists. You’re not in as much luck as you thought though as it’s not likely worth a lot.

I thought these two points together add to something really interesting. The price of oil is rising so much, while the value of the car companies drop. Is this like 2000 when Internet companies were skyrocketing and energy stocks are low. I don’t think so, but crazy things happen in 8 years.

How I Invested My Roth IRA This Year

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About a month ago, I asked you to help me invest my money. I got a lot of great recommendations. As he did last year, Get Rich Slick had the most creative idea, involving options trading. Like last year, I’m sure it will do fantastic. I’m currently not entirely comfortable with options at this stage. I understand the basics of how they work, but I would essentially be putting my money in something that I don’t understand. Doesn’t Warren Buffett say that you should invest in what you know?

I looked at the other suggestions. A few people mentioned investing in gold. I simply hate gold as an investment. I don’t like how it’s not a basic necessity of life in today’s modern world. It makes as much sense to me as investing in tulips. I know it’s stood the test of time, but I think times were different before flat panel TVs and flashy cars. People would use their gold collection to show off their value in society. Today, people use other possessions. I don’t see a trend toward people selling their useful possessions for a hunk of gold. If anything it’s the other way around.

I do recognize that gold has become a way to hedge inflation and the falling dollar. However, there are other ways to do that with assets that are required in the modern world. The rising price of oil is one such example. If all the gold disappeared from the earth, we could likely make due with copper wiring. If oil disappeared, much of the modern society would have great difficulty recovering. Another example is the raising cost of food. Again, it’s a basic necessity that people are required to buy.

For the above two reasons, I heavily considered oil (Powershares DB Oil Fund – Ticker: DBO) and food ETFs (Powershares DB Agriculture – Ticker: DBA). However, in the end, I decided that they were too expensive for me at this stage. They’ve simply appreciated too much in a small timespan. DBO is up 80% in the last year while DBA is up 45%. So I went with expanding my international exposure. I purchased 75 shares of Vanguard FTSE All-World ex-US ETF (Ticker: VEU), which is essentially unchanged over the last year. I felt I was underweight global stocks in what has increasingly become a global economy.

I want to thank everyone for their help. I found there was tremendous value in reading about different investment strategies.