Servias Ministries Blog

The Federal Reserve Bank’s lack of action to backup their bullish dollar comments appears to be sending a "flash point" signal to the worldwide credit markets.  Since last year I have been warning of a financial storm that could wreak havoc in the global markets.  The hurricane warning flags are now being posted:

Barclays warns of a financial storm as Federal Reserve’s credibility crumbles

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/27/cnbarclays127.xml

and

RBS issues global stock and credit crash alert

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/18/cnrbs118.xml

With last week’s notable recovery of the gold price and the Dow Jones Industrial Stocks pushing into Bear territory, Wall Street may be confirming what the British have alerted their clients to.  In itself, sending a subset of global investors into flight may cause the entire herd of elephant size investors to run for the hills.

Oil has responded to the U.S. Dollar’s lack of support by trading at $143.  $170 is now in view.

Gold, Silver, Oil, Natural Gas, Swiss Franc, Euro, etc. are all alternatives to holding dollars.  You have been alerted!

What is a Business Model? A business model is a framework of creating value by a company.

What is a framework? A framework is a basic conceptual structure used to solve or address complex issues.

Source: http://en.wikipedia.org/wiki/Business_model#Do_Business_Models_Matter.3F

Now that I have defined the business model, let’s look at the relevance of this topic to Biblical Economics and Love.

VALUE!

Four years ago, we bought a high-end digital television from BestBuy as a family Christmas present. The salesman urged me to buy an extended warranty. I agreed knowing that new technology tended to have “bugs” and I didn’t want a negative experience one month out of factory warranty. He indicated that the one working part (the lamp bulb) could burn out and justify the extended warranty. I took the bait. Anytime I look at extended warranties I look at the probability of the company remaining in business over the life of the warranty. After all, serviceability is the backbone of an extended warranty. I had a total of four years ending December of 2008 to test this “Value Add”.

It happened! The lamp bulb finally burned out. I pulled my paperwork and manual from the file, so much for simplifying my life. I have to keep a file with manuals for all of the electronics in insure that if the device fails, I have my receipt, a copy of the warranty, etc. Uggh! BestBuy suggests that you go to their website for Warranty customer service. No way! As an Information Technology professional I know that they want me to do all of the work. How do I know whether or not their website will freeze up just before I press the critical button? I called their 800 number, I am taking no chances on finally using this extended warranty.

When I connected to their warranty service I immediately was connected to a live person, just kidding! I went through their automated telephone directory “people barrier” system. If you have the resolve to navigate through this system, they will talk with you. After a few minutes of being on hold, I finally spoke to a customer service person. Hallelujah! After I explained that my TV needed a bulb (based on the manual’s problem analysis page), she directed me to the parts department. While on hold, They had me listen to their recording boasting of maintaining over 7,000,000 parts in inventory. Wow! I was sure that this was going to be worth the wait. After 8-10 minutes of being on “hold”, the parts person finally picked up my call. Once again, they brought up my record after I gave them my 10 digit extended warranty #. This was not enough. He wanted my serial #. Wait a minute, don’t they keep that information on file? Oh well, after retrieving my trusty flashlight and magic reading glasses, I was able to locate the serial # in the dark abyss behind my TV where a thousand cables reside. @#$%^*, there it is! Armed with my serial # I returned to the phone. In my manual, the model # of the bulb was mentioned. Obviously Sony knew that this bulb was going to fail. I wonder why they didn’t include an extra? Anyway, the parts representative agreed with me on my bulb’s model #.

Now came the surprise: “We will ship you the bulb 4-6 business days“. What? The bulb is not close by? Knowing that most large companies can ship in 3 days, I pressed the guy on the other end. Why don’t you immediately ship it? He said that they must get the bulb from the manufacturer. WHAT ABOUT THAT 7,000,000 part inventory???? I spent $$$$ for this high dollar TV and you don’t stock the bulb? Gimmee your supervisor.

After 4-5 minutes on hold again, the supervisor re-explained that they don’t stock the part and must obtain it from Sony. However, she indicated that if I was able to buy the part myself, they would reimburse me for the cost of the part. After much frustration, I asked to be returned to the parts department. They had not given me any tracking information and I needed to be sure the part was ordered. Once again while on hold they were rubbing those 7,000,000 parts in my face. After 8-10 minutes of the recording with an interruption indicating that the “next available representative would be with me in 2 minutes” four times, I spoke to another parts person. She found my order and gave me the tracking information. She assured me that I would receive an email confirmation. So, at the end of 45 minutes, I hung up.

I wondered…. I think that I will google that lamp bulb on the Internet and see if I can get it here sooner. In five minutes, I found the bulb. The company had 18 Sony bulbs in stock and they could ship it out today (Saturday) and I would have it in 3 days. What is wrong with this picture?

BestBuy’s business model contains serious disconnects. This issue is not unique to BestBuy. IBM’s administrative red tape defies understanding. One customer can have multiple customer numbers and customers have complained for 30 years about the problem. Our largest newspaper in the state is converting to a new system and we were immediately past due on our bill that we have paid on the same day of the month for 15 years. The new software did not use the same business rules as the previous software.

America’s business model is breaking. When I was inquiring of The Lord, HE indicated that this would continue and that I was to accept this as a warning of things to come. I didn’t bring up the topic, HE did. The above experience is the symptom. I found that BestBuy was using a 3rd party to fulfill the parts needed in the Extended Warranty program. I was not talking to a BestBuy employee. In the above diagram, “the partner network” was being used for this function. The theory was good, the reality stunk! As more consumers get exposed to these breaking business models, sales will decline. Simplicity will once again prevail. People will walk away from the complexities of today’s environment.

There has been a mismatch of gifts and callings with employment. There are those who are called to run businesses based on the principles of love, not greed. Those people will be raised to leadership roles as the greed is cleansed from the system. Current business models serve the corporation and its executives’ bonuses, not the customer.Who will cleanse the system? Our Heavenly Father. HE will install HIS business Model- Love! Rather than exploit consumers, businesses will serve consumers. At that time, customer SERVICE will return. Until then brace yourself.

PS. When I opened my email confirmation from BestBuy, they were shipping me a Philips bulb, not a Sony bulb.

PSS. After posting this, I went to activate my new Citibank credit card used in my business.  I went through all the automated steps, was redirected to a live Rep.  She apologized for their system being down and please call back in a few hours.

Recent record oil prices would suggest that we revisit the primary driver of high prices.  Throughout our lives there has always been an abundance of oil.  When Jed Clampett shot his rifle and discovered oil on the show "Beverly Hillbillies", the view of oil was one of abundance.  Oil discoveries enhanced economic development of the western world for the last 150 years.  The energy contained in one barrel of oil far surpasses earlier fuel sources.  The automobile propelled expansion of goods and services throughout the U.S.  That was then.

As I have shared in previous writings, major oil fields (called elephant fields) are in decline.

Conventional world oil production peaked in May of 2005.  The producing nations have been unable to sustain production of existing fields as well as replace depleting wells with new discoveries.  In 1956 Dr. M. King Hubbert, Geophysicist, predicted peak oil in the U.S. to occur between 1965 and 1970.  He was right!  Further, in 1975,he predicted world peak production in 1995 "if current trends continue".  Others have studied peak oil and have given their own prediction as shown by the graph below:

(click on Image to enlarge)

As of this writing, it appears that May of 2005 may be acknowledged as the peak a few years from now.  There are many opinions about when oil will peak.  I prefer to give credence to the technical views rather than the politically motivated (or funded) views.  Matthew Simmons, an investment banker, conducted a field by field research study based on technical papers provided by engineers around the world.  He concluded that peak oil was upon us.  In his book Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy, Simmons provides a rather complete analysis of the major fields  (elephant fields) and statistically shows that world production is peaking.

Robert Hirsch and associates conducted a study for the U.S. Department of Energy.  The study was published in February of 2005.  The following are the conclusions of the Hirsch Report:

• World oil peaking is going to happen, and will likely be abrupt.
• Oil peaking will adversely affect global economies, particularly those most dependent on oil.
• Oil peaking presents a unique challenge (“it will be abrupt and revolutionary”).
• The problem is liquid fuels (growth in demand mainly from transportation sector).
• Mitigation efforts will require substantial time.
  • 20 years is required to transition without substantial impacts
  • A 10 year rush transition with moderate impacts is possible with extraordinary efforts from governments, industry, and consumers
  • Late initiation of mitigation may result in severe consequences.
• Both supply and demand will require attention.
• It is a matter of risk management (mitigating action must come before the peak).
• Government intervention will be required.
• Economic upheaval is not inevitable (“given enough lead-time, the problems are soluble with existing technologies.”)
• More information is needed to more precisely determine the peak timeframe.

The current supply problem was not unanticipated.  Short-term thinking by the U.S. leadership placed the American people in this serious economic challenge.  Cheap energy has been the economic assumption of the entire American population.  This population has also been the economic engine of the globe.  The shift away from cheap energy thinking will be difficult, impossible for some.  The movie "Giant" was about a west Texas rancher who fought the oil and gas paradigm, first in denial then in anger.  How long will the American people live in denial and anger?  The world is moving away from the "American-centric" thinking.  How long will it take?  It is moving much faster up the exponential curve now.

There is unlimited free energy.  Scientists have not been able to unlock the energy potential in cold fusion and other technologies.  I believe that the world is at a crossroads.  "Control" has prevailed in the recent past.  Our Heavenly Father is well aware of our energy situation.  It would appear that a day of judgment and repentance is coming.  Repentance is "turning away" from your present course.  The revelation associated with free energy will be withheld until that day of repentance is at hand.  Once we repent and once again seek The Father and His Love, I believe the Tabernacles period will be in full view for all to see.  At that time we will not be held captive by those who control the resources but will appreciate what "rest" really means!

This week the airlines were in the news with their massive personnel cuts and downsizing plans.  See: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=als_9FvReWTY  Something just didn’t seem right.  The reason given for cutting jobs, schedules, and increasing fares by up to four times the previous prices just didn’t add up.  Being the financially oriented guy I am I decided to do a little research.  Here is what I found:

One of the most popular airplanes is the Boeing 737.  Southwest Airlines has built its business model around the 737.  Other low cost carriers have done the same.  I have flown hundreds (maybe thousands) of flights in a 737.  The following numbers represent estimates based on practical views of the "fuel issue".

The burn rate of fuel for a Boeing 737-4 is 792 gallons per hour. Source:

http://www.pbs.org/wgbh/nova/teachers/activities/3203_concorde.html

The cost per gallon of jet fuel on May 30th, 2008 was $3.826.  Source:http://www.iata.org/whatwedo/economics/fuel_monitor/index.htm

So, let’s look at the economic comparison versus one year ago:

Oklahoma City to Kansas City on Southwest is approximately 1 hour of flight time.

Current year cost:

There are about 122 maximum seats on the flight.  I have been passenger 122 before.  It was ugly in the very back of the plane!

On a full flight, the cost of fuel to Kansas City was approximately 792 gallons x $3.826 = $2,996.93 or $24.56 per passenger.

On a 61 passenger flight the cost was $49.13.  However, this summer I have not been on a flight half full, most flights were 100% full.

Last year cost (1.99 per gallon):

Full flight:  792 x $1.99 = $1,576..08 or $12.92 per passenger.

61 passenger flight: $25.84 per passenger

Increase in fuel cost per passenger:   Full flight- $11.65    Half full flight- $23.29

CONCLUSION:

The airlines can easily raise fares by $25 per ticket.  They do it all the time.  We are being misled to think that their cutbacks are due to the "fuel crisis".  It would appear that they are using the "crisis" to trim staff, eliminate marginal routes, and erase expansion/aircraft mistakes.  What can the employee unions do about a crisis?  Would they dare strike when everyone knows the losses are due to the price of a gallon of jet fuel?

Let’s assume that my calculations are off by 100%.  A $50 increase would still cover the increased jet fuel cost.

The price of oil will become the excuse for business to downsize and cut staff in many industries.  Inflation actually helps wholesale distributors’ profits.  Current inventory bought at lower prices but sold at higher inflation pricing levels increases the bottom line.  Once again we are given convenient excuses for higher costs and worse customer service.  My heart goes out to the airline employees who lose the job because of this.

We can see the sun and the wind has subsided, the ocean is still, all is calm, or is it?  The following graph illustrates the seriousness of the problem:

http://research.stlouisfed.org/fred2/fredgraph?chart_type=line&width=1000&height=600&preserve_ratio=true&s%5b1%5d%5bid%5d=BORROW

That hyperbolic blue line is the total borrowings from the Fed, now at about $140 Billion.  The gray sections are the recessions with the 1930’s having the greatest recession (depression).  It looks like we may be due for one if cycles hold true.  We are at risk of another credit meltdown, one even larger than the subprime crisis.  Gold and silver are at nice "buy" levels for those who believe that inflation is running at a greater level than reported by the government.

The New York Attorney General is preparing to settle with the ratings agencies who continued to "look the other way" while the mortgage bankers were placing trash as AAA rated securities into the system.  See:http://www.bloomberg.com/apps/news?pid=20601087&sid=aGcUiy5dBBEs&refer=home  The settlement appears to be a slap on the hand and a "wink".  Once again the investing public is dealing with "unequal weights and measures".  How long will the Lord God Almighty allow this to continue?  It would appear that the entire financial system is being set up for a huge fall.  Investors have been replace by gamblers who have stacked the deck against the average investor.  Hedge funds have been allowed to leverage their bets up to 300 to 1.  The average person cannot leverage anything.  Such leverage cannot stand a serious loss. 

There is approximately $180 Trillion in financial assets and there is about $2 Trillion in gold worldwide.  $1 Trillion is held by Central Banks and the other is held by the public.  Can you imagine the price of gold if just a small percentage held in financial assets were to shift to gold as a protection against inflation?  $3,000 per ounce is not unrealistic.  You can also see that when currency was tied to gold, inflation could not occur.  Once the link was removed, Central Banks could inflate their currencies in the name of expansion.  This will help us understand why a load of bread was once 30 cents.  A disconnect from gold evoked a policy of inherent inflation in the globe’s goods and services.

China is concerned about a dollar crisis within 5 years.  See: http://www.reuters.com/article/reutersEdge/idUSL0221460620080603  I believe we are within 36 months.  I have targeted 1/11/2011 as a watch date.  Oil is a world currency.  It has been denominated in U.S. Dollars but that is changing.  Other countries are beginning to move away from dollar denominated oil exchanges (oil bourse[commodity exchange]).  If the U.S. Dollar were not in a crisis and losing value relative to other currencies, there would not be a move away from dollar denominated oil exchanges.  China’s $1,600,000,000,000 USD is losing value.  I expect the value to decrease by another 30% or about $500 Billion.  What can they do to protect themselves?  They can buy hard assets which will not lose value relative to the dollar.

All of the issues point to a highly complex economic challenge to keep the wheels on the wagon.  State revenues are falling.  Some municipalities have filed bankruptcy.  The following graph provides a state by state outlook:

My advice: Simplify your life.  Get rid of things you don’t need.  Pursue love, not things.  Eliminate debt.  Gold and silver are financial insurance.

To borrow the phrase used by Bill Clinton, "It’s the economy, stupid!"  Much has been written about the recent rise in energy prices.  Many writers quote other writers, government reports, and industry statistics.  What most do not consider is overall supply.  Having first hand knowledge of oil well depletion curves helps one to understand the nature of the problem.  Generally speaking,  the depletion curve of an oil well looks like the following:

Your best production occurs when the oil well initially produces.  You can stimulate the producing zone and get a second uplift on the curve, but over the long run this is the curve.  Once the well is producing, you will normally develop the field that it is in and create a more complex production curve:

The Texas Oil Production Curve is a good representation of fields around the world.  The main difference is the size of the field.  If you put all of the oil producing fields together, they might look similar to this graph.  Why do we care?  In basic economics we have a supply & demand curve.  The basic supply and demand graph would indicate as demand increases, causing a price increase, new supply would be brought into the marketplace.  This assumes that supply is unlimited over time.  The following graph depicts this:

Price

Quantity

The blue line indicates supply will increase as demand (red line) shifts.

The following graph illustrates if supply is fixed:

Price

Quantity

If demand decreases (to the lower red line), the price falls.  However, if demand increases, there is a sharp increase in the price.  Today’s demand for oil is 87 million barrels per day.  Today’s supply of oil is 85 million barrels per day.  This 2 million barrel deficit is causing the increased price of oil.  Additionally, the U.S. Dollar has been declining against other currencies:

If your currency depreciates by 25%, the cost of a global commodity goes up by roughly 25%.  If the U.S. Dollar retained its January 2006 value, oil would be priced at about $97.50 per barrel now and we would be paying about $2.78 per gallon for gasoline.

The 2 million barrel deficit is being made up by existing inventories.  Inventories in the U.S. have declined to 2003 levels.  However in the last 5 years, oil demand has increased.  Former exporting countries such as Great Britain and Indonesia who provided 1 million barrels of day are now importing oil.  Mexico’s oil production dropped 13% this year.  Mexico is the 3rd largest exporter to the U.S.

The balancing factor to these reduced supply factors is the price.  Increased prices forces less demand resulting in the movement of the price curve downward toward the supply coordinate.  Classic economics and Western thinking assumes unlimited supply.  Today we have limited supply.  I know there are those who argue that big oil companies are conspiring to withhold supply, technologies, etc.  The big oil companies have less than 15% of the world’s supply of oil.  State run oil companies have the other 85%.

Other technologies have a promising future.  However, ramping up these technologies will take years before they will substantially impact the current supply dynamics.  You don’t replace 200,000,000+ U.S. vehicles overnight.  Currently, the most scalable solution at our disposal is nuclear.  Without nuclear power, electric cars will be a poor alternative.  It is known among scientists that there is virtually unlimited energy tied up in atoms.  They understand the theory but have been unable to convert the theory into a realistic fuel alternative.

Until the revelation/baptism of Love comes corporately, I believe that the revelation of cheap energy will be withheld.  Love gives.  The "love of money" takes and is never satisfied.  Free energy would drastically change the economic climate around the world.  I believe that Our Heavenly Father will not allow this revelation to be "bottled and sold" by the moneychangers.  It appears that the global community will suffer until there is a corporate movement to turn their attention back to Our Creator.  A cleansing period is ahead and the supply of energy will be the catalyst for refining!

Remember when I wrote: "The Sharks are moving in"? http://www.servias.org/?p=107  They are now beginning to feed.  It will be a great feast.  Lawyers will have record income from the fallout of the sub-prime mortgage crisis.  Directors of Countrywide Financial will be sued along with the corporation.:

Judge Says Countrywide Officers Must Face Suit by Shareholders

See: http://www.nytimes.com/2008/05/15/business/15countrywide.html?_r=2&bl=&ei=5087&en=184fe9e64c13a342&ex=1210996800&oref=slogin&pagewanted=print&oref=slogin

Those who have enjoyed the bonuses and fees of this fiasco are now enjoying sleepless nights.  The judges ruling opens the door for expanded worldwide litigation.  Directors of large corporations are usually among the wealthy and elite and buffered from the risk associated with predatory acts against the average man.  Being a director is a status symbol with perks, easy money.  That easy money is going to be sent to the attorneys to defend these directors against the lawsuits.  The American people will demand their "pound of flesh" after it is all said and done.  Much money will be made during this multi-year frenzy.  Unfortunately, the lawyers will get most of it!

I expect to see pension funds getting in on the action soon with these securities as well as some of the other creative investment vehicles that are now unwinding.  The next president will have his or her hands full with the full blown economic, financial, and energy crisis.

America is now in a window of "crisis".  Financial TV talking heads are telling us the worst is over as they look from inside the eye of the hurricane.  They are attempting to spin every piece of bad news into good news.  I believe it is their heads that are spinning.  There is so much going on, how can the average person view the big picture?  Only the God of Heaven and Earth knows!!!  America has a monstrous ego.  The ego is illusionary at best.  The Lord God Almighty has used this country in the past but it appears that judgment is ahead.  America’s protective covering was lifted at 9/11 if not before.  Rather than repent, the country is fighting wars on two fronts- the war against terror.  Who is against us?  It is anybody that fits the definition defined by those in charge.  The rule of law appears to be broken.  The country is reflecting the hearts of the people.  All people?  Surely not.  Only the majority.

As time passes, the theory that the U.S. invaded Iraq for its oil reserves appears to have more credibility.  The war has now surpassed WWII’s length.  The cost of the Iraq war in American lives, caring for the wounded, and financial impact is staggering.  Are we going to expand the war to Iran?  During President Carter’s Administration the primary issues were Iran, Afghanistan, and inflation.  Déjà Vu!

Energy prices have hit and surpassed my short term target of $125/BBL for oil.  What many don’t realize it that the $11+ natural gas prices will show up on your electric bill soon.  The Green Machine (Environmentalists) has swayed the American public to attack coal as an energy source.  Requests for new coal powered generating plants for electricity are being  rejected state by state.  Coal is currently our cheapest energy source for electricity.

The average American will be hit hard this summer by gasoline prices.  We have been in the "shoulder" season when oil producers switch from winter heating oil demand to summer driving demand.  Historically the price for oil would drop during this time.  Further declines in the value of the dollar and oil production as well as increased demand from China and India have kept the price robust.  The era of cheap energy from oil is at an end.  I recommend trading in your SUV for a Prius or Civic if you can afford it.

Food costs will continue to increase.  We have seen a glimpse of the crisis in the recent upheavals in lesser developed countries.  People need food, shelter, and clothing no matter what country they are in.  The cost of energy to produce and distribute grain has caused food costs to increase by 10-50%.  Home gardens will once again gain popularity as the average person will feel the need to find alternatives to the high cost of groceries.  Restaurants are already feeling the pinch of inflation.  In some areas, restaurant revenues are down 30% compared to last year.

Interest rates are upside down relative to inflation rates.  8-10% inflation compared to 1-3% savings interest rates are causing elderly savers to be punished.  Each year they are losing 5%+ purchasing power.  Social security increases are intentionally tied to a lower index than reality so the government can save money.  This is another example of unequal weights and measures.

I have noticed that the American people are always "too busy".  A great example is the phenomenon of little league baseball.  When I was young I played baseball in the local YMCA league (the only league in town).  We had twelve games in the season.  Our parents came to the game.  Mom was scorekeeper.  Dad was assistant coach.  We practiced every weekday during the 12 week season when we didn’t have a game.  Nowadays little league teams play 40 to 50 games with out of town tournaments.  The season starts earlier and ends later.  The egos of the parents push these poor kids into "burn-out".  This is about to change.  The Sabbath has been watered down to a point where the day of intended reverence and reflection no longer exists in our society.  Man has been "doing what is right in his own eyes" as he did in the Book of Judges.  Since this era of cheap energy is ending,  fifty game seasons for those little leaguers will be pared back to a reasonable season.  Less travel means more time to reflect.  This time of "busyness" will be replaced by a time of repentance.

Compared to our Gross Domestic Product (GDP) our personal debt level exceeds that of the Great Depression.  Financial entities have been predatory towards those who are ignorant of personal financial principles.  Young people are targeted for credit cards.  Generally, they have no business carrying a credit card.  At a recent high school graduation, the keynote speaker urged the graduates to pay cash for purchases and stay away from the trap of buying on credit.  I was expecting to hear the normal "shoot for the stars" motivational speech.  Congress has helped to put us into this mess.  They eliminated our tax deduction for consumer credit thus moving people towards tapping into their home equity for borrowings.  With this larger pool to pull from, consumers responded by increasing their debt.  Congress virtually eliminated the "jubilee" aspect of bankruptcy.  Who do you think lobbied for that change in the law?  The financial institutions, of course!  This nearly guaranteed the credit card companies reduced write-offs.  In the past, their justification for high interest rates was the expected write-offs due to bankruptcies clearing cardholders’ debt.  The laws changed but the rates did not come down.  I suspect that judgment will come to those who exploited the uninformed and immature borrowers.  Personal incomes have not kept up with the increased prices of housing, vehicles, and food.  The consumer is less able to weather a downturn in the economy as in previous times.

Alternative energy has no silver bullet for us.  Scalability is the issue.  For instance, used cooking oil can power a vehicle.  However, if everyone demanded the cooking oil, we don’t have enough supply for the country.  Water can be used as fuel for a car.  However, fresh water is in short supply.  Some states are fighting over the fresh water currently available.  How many autos can tap into the current fresh water supply before you have a water crisis?  Tap water in some areas is corrosive to metal.  Could an engine last for 100,000 miles with this corrosion issue?  Americans have been buying about 17 million vehicles per year.  There are about 250 million vehicles in the U.S.  It would take 15 to 17 years to replace the vehicle fleet in the U.S.  If a silver bullet did surface, it won’t help the next 36 to 48 months.  New refineries can’t be built within the next 48 months.  New oilfields can’t be fully developed within the next 48 months.  New power plants can’t be built within the next 48 months.  Leadership has been asleep at the wheel and  Congress has failed to make the hard decisions in favor of pork barrel pet projects that don’t consider the big picture.

Our Heavenly Father has a plan.  It is being implemented.  Look to HIS guidance.  Walk according to HIS precepts.  As you line up with THE FATHER’S plan, you will prosper during this time of crisis.  After all, HE is not obligated to answer the prayers of your ego, he will only answer the prayers of your heart.  The next 36 to 48 months will tell the tale.  Pray!!

From time to time the market gives us an opportunity to pickup some cheap investments.  The challenge each of us has is to not be moved by the media.  Those in power are well acquainted with the power of persuasion.  Torture is persuasion on steroids.  If you bombard people with a particular view, they will ultimately believe the view you are projecting.  That is why it is so important to "hear" Our Heavenly Father and not be moved by the talking heads on TV.

Isaiah 55:8 For my thoughts [are] not your thoughts, neither [are] your ways my ways, saith the LORD.

The Book of Judges has a consistent theme: the people did evil in the sight of THE LORD, HE delivered them to their enemies, they cried out, then HE sent a deliverer.   The U.S. has moved away from the principles of the Kingdom of God to the principles of Mystery Babylon.  Usury and greed are the basis of the sub-prime mortgage crisis.  Banks, credit card companies and other lending institutions are rationalized why it is good to keep us in financial bondage.  They removed prudent lending practices to ensnare the average person in loans that at best will barely be repaid.  The "Me" generation is quickly moving toward the day of reckoning.  It appears that we are on the same course as in the Book of Judges.  We are shipping over $400 Billion to other countries, some who are potential enemies.  We are paying for their rise to power.  We may be crying out to THE LORD by 1/11/11.

In the meantime, for those who believe that their party will end, the last few days have provided some notable investing opportunities.  Gold dipped to the $870 level.  It sent gold stocks down.  A good example of a gold stock with great potential is Minefinders:

Minefinders is expecting to begin production within months.  The stock is closely held and the management acted responsibly when raising money during the exploration phase.  (See disclaimer on website).  I have invested in this company.  This is not a core holding as would be Goldcorp or Yamana Gold.  However, this stock has dramatic upside potential.  Greater risk but greater reward potential.

Gold and silver bullion were a buy this week.  $870 gold and $16.50 silver are looking cheap now.  Higher energy prices will force metal producers to keep prices higher.  Miners will shut down mining if costs exceed prices of their products.  They have done this in the past.  This creates a floor for metals prices.  China continues to play a major role in prices.  Their new middle class will have a ravenous appetite for goods and services that the West has been accustomed to.  Their meat consumption will rise.  It takes a lot of grain to feed cattle.  Moving from a vegetarian diet to include meat will have an inflationary impact on global food prices and supply.  Americans MUST start thinking globally.  The American-centric world has come to an end.  U.S. companies with employees in other countries are being pressed to pay those employees in Euros or Canadian Dollars.  Those employees are losing purchasing power when paid in U.S. Dollars.

Yamana Gold has had a 33% retracement in price.  From a technical point of view, that is a good buy signal:

I expect gold to push towards $1,600 and beyond.  Yamana and other gold stock are expected to enjoy the ride up.  Goldcorp continues to be a solid stock.  Review of their annual report reinforces my view of their potential.

I expected the natural gas price to take a breather by now.  I was wrong.  Its continued strength simply confirms our view of production declines with increased demand.  Coal is out of favor.  Power companies are starting up their natural gas fired turbines in preparation for the summer heat.  Some of these turbines had been in "moth-balls".  My original 4.25 price floor for natural gas is up to 6.50 now.  However, we might not see 6.50 again in the next few years.

I had projected $125 oil earlier.  $150-160 oil is looking more probable and sooner than I originally thought.  Those who have invested wisely should consider helping those loved ones who are hurting due to the gasoline/energy prices.  In OUR FATHER’S great grace and mercy, our investment successes are to sustain us and those around us, not just "me and my four and no more".

Record oil prices continue!

See: http://online.wsj.com/article/SB120820608486613923.html?mod=googlenews_wsj

Although not the largest exporter of oil, the Russian contribution is just as critical to the overall price structure as any other producer.  You may want to revisit my earlier writing on The Coming Energy Crisis from a Mathematical Perspective at http://www.servias.org/?p=68.

What happened to those predictions of $40 oil?  Don’t you wish that some of those people who erroneously suggested cheaper oil would have to recant their predictions with an apology?  Those "experts" must have had an impact on the average person who then went out and committed to a 6 or 7 year note for their new gas guzzler.  Unfortunately most of us cannot immediately reverse a decision like that.  I suggest that you take action to become more energy efficient.  $10 natural gas will equate to higher electricity costs.  If we have another Katrina-type hurricane, $150 oil is probable.  $125 oil is inevitable at this juncture.

Don’t let Congress off the hook.  They make money on high priced gasoline in taxes.  It is a very lucrative revenue stream.  The following graph provides a breakdown of the revenue distribution:

The taxes add no value to a gallon of gasoline.  I wonder if the government authorities will reduce their portion of revenue to help the hurting consumer?  Happy Tax day!