Lock in Your Price for Gasoline
Research for Online Investors

by John Dalt

12/04/09

I try not to repeat ideas in MarketWatch.  Looking at the markets and thinking about next year, I thought today to repeat an idea from last January 13  The core of the article was the genesis of declaring crude oil the ‘trade of the year’ for 2009  I didn’t use that term until later in the spring, but U.S. Oil Fund ETF (USO) closed that day at $31.82 and gasoline was selling for $1.70 at the local gas station.

Today USO is trading at $38.50 and gasoline retails for $2.45 a gallon.  We have some ‘tracking error’ or slippage in the USO, and the ‘crack spread’ has tightened in the past 11 months.  USO is up 21% and retail gasoline is up 44%

From $1.70 Gas for Next Year:
“If you plan to drive 20,000 miles next year and your car gets 17 miles to the gallon, you will use 1177 gallons of gas.  Today the price of gas is about $1.70.  1.70  X 1177 = $2001.  Today you can buy $2000 worth of one of these ETF’s and drive next year for the same net price.  You might want to buy a few years worth!”

USO is trading down today, the dollar is up and precious metals are crashing.  The underlying truth in the excerpt above still applies.  I will repeat this again next winter, when gasoline is up another 40 or 50%, if we are lucky.  This is the easiest way to protect your family from high gasoline prices next year.

Crude oil will become more expensive, it is just a matter of time.  In the U.S. we are going to face a double whammy.  Oil will get more expensive because of world supply and demand.  The U.S. dollar is going to get cheaper against other currencies because of our ballooning deficits and borrowing.  Crude oil may go up in other currencies by 30% next year, but 50% in U.S. dollars!  All the mania is on precious metals right now, but gold won’t move your car!  You cannot make trash bags, plastic and tires out of gold.  As the economy recovers, oil will go higher.

I have set up a ‘twitter’ account today for use if you would like to follow. I had resisted this, but the convenience became apparent today with fast changing market conditions and SwingTrader positions. We sent out our regular alert, an after employment data alert, and a mid-day alert. When a market moves as fast as it did today, traders need to be able to adjust.

I don’t like sending alerts during the day for any of our premium services.  Our goal is to provide services for people that still work jobs or have a business to run, but want to capitalize on trading and/or investing in the stock market.  You can sign up to follow me at: galtstock.  We will work together for the best way to use it.  I promise it will not be abused.  Let me know what your ideas are for the best use of twitter at feedback@galtstock.com

Last week we toyed with the idea of making t-shirts with maobama's picture and a great caption.  I have let this cool after looking on the internet.  A google search of "maobama t-shirt" produces 5720 results.  I better stick to what I know and let the people that know t-shirts take care of their business.

W e have written about the dollar trade, and how it is powering the commodity and precious metals boom. The dollar rallied today after the unemployment report this morning. But, with record setting US deficits and a weak US economy, the US dollar continues to trend lower. After all, a virtual collapse of the banking sector does have its consequences. For some perspective, today's chart illustrates the current trend in the US dollar (blue line) as well as that other world currency, gold (gray line). The performance of the US dollar has varied inversely to that of gold since the latter stages of the credit bubble. It is worth noting that the US dollar is currently testing resistance of its downtrend (red line) while gold makes record highs.

Will these two lines ever meet again?

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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