Saturday, April 29, 2006

Evil Energy

Here are some facts I've gleened from the current events regarding oil.

The country's three largest petroleum companies - Exxon Mobil (XOM) Corp., Chevron (CVX) Corp. and ConocoPhillips (COP) - posted combined first-quarter income of almost $16 billion, an increase of 17 percent from the year before.

No doubt we have a Dr. Evil here...but wait...

Taken together, Exxon, Chevron and ConocoPhillips made a profit of $8.19 on every $100 in sales. In contrast, Internet bellwethers Google Inc. (GOOG), Yahoo Inc. (YHOO) and eBay (EBAY) Inc. collectively turned a $19.20 profit on every $100 of their combined revenue.

And of course, despite the outrage from our congressmen, the government sees to it that it gets its share of the windfall...

In the first quarter, Exxon, Chevron and ConocoPhillips turned over a combined $13.8 billion in sales taxes - about 7 percent of their total revenue.

This supports my claim stated in an earlier post...

Economists are perhaps most troubled by the possibility that lawmakers will consider suspending the federal 18.4-cent-per-gallon gasoline tax. All that would do is raise demand and worsen the government deficit - a lose-lose proposition, they said.

And here is a statement that affirms the logical conclusion of free markets...

Art Smith, chief executive of energy consultant John S. Herold, said $75 oil is "the best thing that could happen to the alternative energy business" and is the greatest force for change in the market. He and other analysts said SUV sales are already declining, and they expect Americans to think more critically about the energy efficiency of their homes and the lengths of their commutes in the years ahead.

We haven't seen much about this in the news yet but the cost of increases in petroleum reflected at the pump are only the beginning. Keep in mind that everything you buy is transported to the stores you frequent by rail and truck. The increased transportation costs will eventually and most assuredly appear in the price tag of the goods you purchase as transportation costs will inevitably be passed on to the consumer.

Also note that petroleum is a vital component in the manufacture of many of the products we buy today. The increase in the cost of petroleum will eventually be reflected there as well.

Sure, higher energy prices are tough to take but you don't have to be a victim. You can invest in energy companies to offset the losses due to higher prices of petroleum and related products. Another positive note is that higher energy prices enable alternative energy technologies to be developed. This, and only this, will free us from our dependency on OPEC.

God Save Their Souls

For some people the death penalty would be a sentence of unfathomable mercy compared to what they deserve:

Prosecutors won't seek hate-crime charges against two white teens accused of brutally beating and sodomizing a 16-year-old Hispanic boy after he tried to kiss a young girl, officials said.

If the teenagers are convicted, though, jurors will be told during sentencing about the ethnic slurs used during the attack, Harris County prosecutor Mike Trent told the Houston Chronicle for Friday's editions. David Henry Tuck, 18, and Keith Robert Turner, 17, are both charged with aggravated sexual assault in the attack that left the unidentified victim in critical condition with massive internal injuries.

Authorities said the two dragged the boy from a house party Saturday and into the yard, where they sodomized him with a plastic pipe from a patio table umbrella and poured bleach on him. Trent on Friday described the pipe as being sharpened at one end and said Tuck stomped on the boy with steel-toe boots and kicked the pipe into him. At one point, the teens tried to carve something on the boy's chest with a knife, he told CNN Friday.

"I don't know that the very beginning of the attack was racial," Trent said, "but there's no question that they were venting quite a bit of hatred in their hearts."

The victim lay behind the house for more than 10 hours before he was found and someone called an ambulance. Trent said there were witnesses to the beating, though no one else had been charged. "You do certainly have to wonder why anyone not report that for as long as they did," he told CNN.

Investigators said the attack happened at an unsupervised house party in Spring after the 16-year-old tried to kiss a 12-year-old Hispanic girl.

Bleach was poured over the boy's body in an attempt to destroy DNA evidence, Sheriff's Lt. John Denholm said. Trent said Friday that doctors had also told investigators they suspected some kind of toxicity in his internal organs that may have been caused by foreign substance, "which makes me wonder if they didn't pour bleach down the pipe as well."

The sexual assault charges are punishable by five years to life in prison. Trent said if the victim dies, the teens could face murder charges punishable by life in prison or the death penalty.

Never mind their ages and the Supreme Court's refusal to allow minors to be executed. Anyone who would do what these two young men did is an animal that should be put to rest just as would be done with a vicious dog. Even if the victim doesn't die, his attackers should at the very least spend the rest of their lives in prison. They don't belong in human society.

I know. Someone will ask what room such sentiments leave for Christian compassion and human redemption. Christian compassion consists in resisting the temptation to treat these wretches in the same savage fashion that they treated their victim. They should be executed quickly and painlessly and then forgotten.

As for redemption this a theological matter and as such is of no concern to the state. Redemption is the prerogative of God, not society. The state's responsibility is to dispatch justice tempered with mercy (compassion). We do pray, nonetheless, that God save the souls of these monsters even as we wish that the justice system could, and would, make their souls available for saving.

Causes of Decline

A friend notes an interesting item from an article in our local paper. In a speech marking a celebration of a local councilwoman being named Democrat of the Year, state representative Daylin Leach (D) pointed to three events from the 1960s and 1970s which caused the current decline of the Democratic party - the Vietnam War, the Civil Rights Movement and Roe vs. Wade. Since 1974, he said, Democrats have not had a banner year in national politics.

The article doesn't say exactly how these issues precipitated the Democrats' fall from popular grace, but we can guess. The Vietnam war, for instance, branded the Democrats for two generations as soft on national defense. The current crop of Democrats have only reinforced that perception among the public.

The Civil Rights Movement, which could have been the crowning achievement of the Democrats in the last half of the twentieth century, turned out to be a mixed bag. John Kennedy, Lyndon Johnson, Hubert Humphrey and others get much of the credit for the progress of civil rights in the 60's and 70's, but it was also Democrats in the south who opposed the national leadership and fought to maintain segregation and racial inequality. Moreover, although minorities made enormous strides under LBJ's Great Society they also suffered from the dysgenic effects of the welfare state, plunging to greater depths of dependency and crystalizing into an American underclass. Other aspects of the civil rights movement also alienated voters - affirmative action, for example, and the waste of millions, if not billions, of dollars which did nothing to lift people out of poverty, but only lined the pockets of politicians and con artists.

Lastly, it has taken thirty five years for the American public to realize the moral impoverishment of our abortion culture, but it is dawning upon increasing numbers of people that, as Ramesh Ponnuru says in his new book, the Democrats, in their zeal for the right to kill unborn children, have become the party of death. There is a majority of people in this country who still find that repulsive.

We'd probably want to cite a few more events or trends of the sixties and seventies that have led to voter disenchantment with the Democratic party, but Leach's statement is interesting, and all the more since it was contained in a speech given by a Democrat to Democrats. Unfortunately, for those who would like to see a return of the Democratic political hegemony, few in the current leadership will be receptive to messages like his, and even fewer will be in a position to do anything to change the perceptions Leach laments.

Something to Think About

Victor Davis Hanson gives those who argue that we should set a date for Iraq to get its act together and that if they don't meet it we should begin withdrawing immediately something to think about:

As for the Iranian crisis, the only peaceful solution, given Russian meddling and Western fear over oil prices, may be through the emergence of democracy in Iraq, which would then galvanize dissidents in Iran. Anyone who rules out force in dealing with Iran's nuclear ambitions should support unequivocally the democratic experiment in Iraq.

An Iraqi democracy may well serve as a model for Iranians tired of the oppression of the imamocracy they've endured for thirty years. If Iraq is allowed to fail, however, then it will exert no positive pressure on Iran to change, and the current leadership in Tehran will continue its mad pursuit of nuclear weapons.

In other words, one consequence of failure to "stay the course" in Iraq is that it will become more likely that it will be necessary to go to war with Iran. No one who shudders at that prospect should be urging us to get out of Iraq even one day before that country is stable and able to go it alone against its enemies.

DOW / Gold Ratio

Here's an interesting chart that I look at from time to time.

The lower chart illustrates the DOW / Gold ratio for over the last 100 years. If you move your mouse to hover over the lower right corner of the chart an icon appears that enables you to zoom in on the chart (at least in Internet Explorer).

It's informative for several reasons. It shows that prior to a bull market in stocks, the price of gold was relatively close to the price of the DOW. We see this prior to 1929, during the '50s and '60s and then again just before the bull market of the '90s. For example, in 1980 when gold was around $800 and the DOW was around 1600, the ratio was 2 to 1 and one could "buy" the DOW with two ounces of gold.

We also see that during the bull markets the ratio diverged greatly with the last period being the year 2000 when gold was around $265 and the DOW just under 12000. That's a ratio of around 45 to 1. It took almost 45 ounces of gold to "buy" the DOW.

Since 2000 the ratio has been declining again and is presently at around 17 to 1. Over the last 100 years the ratio has always reverted to its mean and it doesn't look like this time will be any different.

What this chart doesn't tell us is what the prices will be for gold and the DOW when the mean ratio of 2 to 1 is achieved again. At today's price of $650 per ounce of gold the DOW would have to drop to about 1300. Not a likely scenario. On the other hand, if the DOW were to stay near 12000 for the next several years, the price of gold would have to rise to about $6000 per ounce. Also not too likely. And for you stock market bulls out there a third scenario is that the DOW goes to 36000 but then the price of gold would have to climb to $18000 per ounce.

The more probable scenario is that they will meet somewhere in between. The DOW could drop to 8000 and the price of gold could rise to $4000 per ounce. Or the DOW could drop to 6000 and the price of gold could rise to $3000 per ounce.

Looking at the chart and the trend that's been in place for the last six years it seems apparent that the mean ratio will be achieved before the next divergence begins causing the ratio to increase yet again.

Given all of this, it certainly appears that $1 invested in gold is a much better play than the same $1 invested in the DOW.