Drops of Oil

The investing environment is really choppy out there right now as we await news from The Federal Reserve. I do think inflationary pressures are increasing, particularly in the global economy and I would like to see the dollar gain strength. I think the FED stands still today, but floats rhetoric signaling potential rate hikes later in the year, post election (winner is?) and with the housing inventories having more time to subside.

A big impact on the items the FED is considering is the costs of oil and commodities in general. The rise in pricing in theses areas is a tax on the consumer, and coupled with discretionary income taking a beating due to the housing crisis, the economy is retracting.

But will oil unwind and relax the consumers monthly outlays at the gas pump? Money poured into the dot.com areas only to be crushed and then, after 9-11, investment capital went diving into tangible assets (real estate) and then when that blew up, commodities.

Speculators are not a central issue with oil but the do play a role. Alan Reynolds, senior fellow with The Cato Institute, notes, "Speculation that oil prices will rise rather than fall has dropped drastically since we crossed $100 mark. The "net long" position on the New York Mercantile Exchange fell from 113,307 contracts on March 11 to 25,246 by June 10 -so nearly as many traders are now shorting oil as are going long". Oh my!

If money is not going there anymore, where is that investment capital going? In the last six weeks, I have noticed coal stocks ascending nicely, an indication of institutional investment or accumulation.

Please see a chart for James River Coal Company (JRCC:NASDAQ) below:

Coal is ultimately the main energy competitor to oil and in this political environment it is wise to investigate investment opportunities. JRCC has doubled since May, and following the money is change you can count on!