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As oil prices came close to $140 a barrel this summer, many analysts predicted that oil would come close to $200. Where did the oil go now?

Oil is at $80 a barrel. Instead of going up it is moving down thanks to another bubble along with commodities. There were so many analysts predicting oil prices at $200, even Goldman Sachs who in fact predicted $200 a barrel now cuts its estimates to $70 a barrel.

When dollar was declining many investors start to buy commodities, especially oil which send prices higher.

Goldman was bullish on oil all the time predicting growth and in supply which pushed oil prices higher even though people were driving less. (more…)

The weekend party conversation filled itself with the speech of the Armageddon. More than one person told me in no uncertain terms that the world was coming to an end. My answer to friends, clients and family includes three facts. One, we’ve been here before. Two, great American companies still sell stuff to people. Three, cash cannot stay cash for long. Let me explain.

First, we’ve seen this all before and the world is still here. Calm down. In fact, in my experience as an investment advisor two important dates remind me to stay cool. In October 1987 I sat in my office wondering if the world was falling off a cliff. The market fell 22% in one day. This would be today’s equivalent of a one day drop of 2300 points! But, exactly one year later on Oct. 19, 1988 the market was up 23%!

More recently, also in October, but this time in 2002, (more…)

Markets have received a new life via additional liquidity poured by central banks worldwide in recent past. European Central Bank, Bank of England, United States` Federal Reserve and other major central banks are fighting tooth and nail with current financial fiasco. Markets have been rocked by news of problems in banks and funds exposed to risky investments in U.S. mortgage and asset-backed markets, provoking fears of a choking-off of the cheap credit that has been fueling global growth. Asian markets are not water proof i.e. sooner or later they are going to yield all gains of last year. The major central banks are creating a financial rescue blueprint for the anticipatory money market turmoil. They are providing liquidity in the market at last minute in order to retard nosedive and a lot yet to be come out from the basket of policy makers.

Stock markets have tumbled down noticeably all over the world in the recent past. HangSeng of Hong Kong has gone well below 20,000 levels, Indian National Stock Exchange closed below psychological 4,000 levels on Friday, and Dow Jones is hovering around magical 10,000 levels. Japanese Nikkei, Chinese shanghai, French CAC, German DAX, UK FTSE, Indian BSE SENSENX shredded off almost all gains of last year. What we are evidencing is just a tip of iceberg the major meltdown may come if some strong decision has not been made in coming days in order to bypass looming catastrophe. Major reforms are inevitable and need of hour in financial sector. Fire in the banking and investment sector has to be put out in initial stage itself otherwise whole world must get ready to pay for the damage. At present largely it is limited to United States, the largest economy of the world, but this inferno ready to engulf vulnerable emerging economies if situation prevails in near future.

Banking and investment giants like Lehman brothers holdings (already filed chapter 11), Merrill lynch, American International Group, Goldman Sachs, Wachovia (more…)

“I’m in show business, why come to me?”

“War is show business, that’s why we’re here.”

- “Wag the Dog” (1997 film)

The first week of August 2008, Fannie Mae and Freddie Mac had just announced record losses, and so had most reporting corporations. Unemployment was mounting, the foreclosure crisis was deepening, state budgets were in shambles, and massive bailouts were everywhere. Investors had every reason to expect the dollar and the stock market to plummet, and gold and oil to shoot up. Strangely, the Dow Jones Industrial Average gained 300 points, the dollar strengthened, and gold and oil were crushed. What happened?

It hardly took psychic powers to see that the Plunge Protection Team had come to the rescue. Formally known as the President’s Working Group on Financial Markets, the PPT was once concealed and its very existence denied as if it were a matter of strict national security. But the PPT has now come out of the closet. What was once a legally questionable “manipulator” of markets has become a sanctioned stabilizer and protector of markets. The new tone was set in January 2008, when global markets took their worst tumble since September 11, 2001. Senator Hillary Clinton said in a statement reported by the State News Service:

“I think it’s imperative that the following step be taken. The President should have already and should do so very quickly, convene the President’s Working Group on Financial Markets. That’s something that he can ask the Secretary of the Treasury to do. This has to be coordinated across markets with the regulators here and obviously with regulators and central banks around the world.”

The mystery over what was going on with the dollar the first week in August was solved by James Turk, founder of GoldMoney, who wrote on August 7: (more…)

News of the global insurer AIG’s financial meltdown was hard to ignore. Once the Federal Reserve provided an $85 billion loan package, AIG avoided bankruptcy in the short term. In exchange, AIG must pay a high interest rate on the loan (over 11%), agree to oust its CEO and give warrants that equal 80% ownership to the US federal government. The capital and liquidity crunch faced by AIG resulted in from it’s exposure to bad mortgage debt by the parent AIG holding company.

Repercussions for Policyholders

You may own a life insurance policy from AIG or one of its subsidiaries (American General or US Life of NY). These companies’ capital and reserves are heavily regulated by state law. Each entity is responsible for its own liabilities. Therefore, policyholders are less exposed to the financial turmoil of the parent AIG holding company.

What are the experts saying?

To relieve policyholder anxiety, American General released the statement: “American General Life is well capitalized to meet or exceed local regulatory capital requirements and fully committed to meeting the needs of their policyholders across the U.S.” (more…)