Why is everyone surprised by OPEC's decision?

 Many were shocked wednesday after OPEC failed to reach an agreement to boost oil production. Should they be? The answer is no. The nations pushing for an increase in production believe that there's not enough supply in the world to meet the increasing demand. More so with OPEC nation Libya not being currently able to contribute to the global output. On the other hand, the nations against boosting production believe just the opposite. According to them, the world is awash in oil, and there's no reason why they should pump more into the system. I believe they're absolutely right. As for the supply issue, shortly after OPEC decided against boosting production the Saudi's all of a sudden decided they would increase substantially their own output in order to meet demand. Furthermore, just after OPEC's meeting we received news that Exxon had made a major find in the Gulf of Mexico that would likely turn them into one of the biggest producers in the area. So much for short supply. As for high prices, the market by now should realize that the price of oil is high not because of supply issues, but because there's too much speculation in the system. Washington has to open its eyes and realize that as long as margin requirements stay low speculators are going to keep controlling the price of the commodity, and as a result, the pocketbook of the American people.

Raise or Default?

  Surely you're familiar with the controversy that America faces over its deficit. Do to uncontrolled spending the U.S government now faces a very tough choice -let america default on its debt, or raise the debt ceiling. House speaker John Boehner said last week that it would terribly irresponsible to let America default on it's debt, but it would be even more irresponsible to raise the debt ceiling without making any serious cuts to government spending.

In my opinion, if the American government doesn't get it's budget organized and arranges the appropriate budget cuts, this deficit issue is going to become an annual occurrence. Raising the debt ceiling without making any adjustments to it's just plain irresponsibility. Although making adjustment to government spending may bring some undesirable consequences, in the long run is the best move. It would put American on solid ground for the future, and this issue wont persist later in eventually become unbearable

Furthermore, the secretary of the treasury Tim Geitner said that if the appropriate measures are not taken to correct this issue America will be pulled back into a financial crises as bad or even worst that the one the country is just now recovering from... I know, scary thought.

The GOP and Democrats should get their house in order, and find some middle ground on their differences and so they can address the most delicate issue that America is now facing. The GOP should take a look at their budget plan which proposes some excessive cuts to some key issues of the American way of live. Mr. Obama probably did go a little overboard calling the GOP's plan unAmerican, but it's well on it's way. Medicare and Medicaid are two programs imperative to the American people and the GOP's plan practically wipes them out.

So the question remains, what would the brilliant minds that lead america do? let the country default on it's debt or raise the debt ceiling? I really hope it's the second one, but with the appropriate cuts to government spending. If not, well, we're heading for a wild ride not so long from now.

Okay oil and commodities are finally down, what's next?

For the past couple of months there has been panic over rising commodity prices. Escalating oil prices were supposed to be pulling us back into recession. Gold and silver were hitting all time highs on consecutive days. And when Mr Bernanke, the man who's driving the economy, was caught saying that this surge in prices was temporary and was not a cause for concern, he got crucified. Investors were selling retailers and industrials left to right thinking, logically, that high pries were going to drive down the stocks.

So what in god's name happened today? Oil finally surrenders that $100 level it had been holding on to for quite a while now, dropping a whopping $10 and settling at around $99. Gold and silver also took a hit falling over $10. And yet -this is the part that I don't get- the sense of panic seems to remain? Let me get this straight. All of our worries over commodities have been lifted of our shoulders and instead of acting relieved we look for reasons to keep feeding this pessimistic mentality. Are we now supposed to panic over the drop in commodities?

No!! Don't panic!! Maybe a week or so ago if you panicked you weren't consider a fool, but you definitely are if you do now. It's time to buy the stocks that were sold because of the high prices in commodities. Think industrial. This earning season the 75% of the companies on the industrial sector that have reported have beaten earnings expectations. This trend will be even stronger now that commodity prices have pulled back.

Trust what makes sense, and in this case what makes sense is that this drop on commodity prices has eased a pressure that has been mounting on the markets for the last couple of months. Lower commodity prices, especially oil, will ultimately be good for the markets and the economy.

The New Gold Standard?

To what can we attribute golds ability to do well in the middle of such economic turmoil?

Monday, after the S&P warned the government about downgrading the credit rating, gold reached a new high in the middle of a market that got crushed because of the news.

On tuesday, gold rose again $4.90, and finally settled over, for the first time, $1,503.20 a new nominal high. The precious metal is also up 5.8% so far this year.

Golds new role as a safe heaven makes sense once you've taken current events into account. Among them, the S&P's downgrade that managed to speed up the decline of an already weak dollar. Downward pressure on the currency is only expected to continue as the Fed is prone to maintain interests rates low, and downplay inflation. A Wall Street Journal article claims that the main driver for the dollars decline is low interest rates in the U.S with rising interest rates abroad. For the first time ever, next week, Bernanke is going to answer the media's questions about the Feds plans.

The currency is also been undermine by a divided government which, in the mean while, doesn't seem to be able to find common ground between the plans both parties have proposed to reduce the massive budget deficit that faces the nation. It's the worries about this topic that's intensifying the selloff, and even more when the S&P threatened the government to take away the coveted AAA credit rating.

Moreover, the metal has also rallied despite financial turmoil in Europe. The ECP, along with the People's Bank of China, recently increased interest rates. Investors are also concerned about the euro's outlook, as the sovereign debt crisis across the atlantic worsens, and investors look for safety behind the precious metal.

Also, the resiliency of the unrest in the Middle East, and the beginning of economic recovery in Japan, make gold the perfect safe haven.

Before investing in this gold extravaganza, you have realize that the gold market is relatively small when compared to the bond and stock market, and as such is highly more volatile.

Furthermore, many claim the metal's momentum is highly dependent on whatever resolution it's found to these issues. Another Wall Street Journal article talks about gold losing its allure once the investing environment turns back to normal and "where growth is sustainable without extraordinary government support".

Next week should be very interesting to see how soaring gold prices react to what Mr Bernanke has to say about the Fed's plan in the first ever press conference conducted by the head of the Federal Reserve. In my opinion gold is prone to reach new highs just because resolution to any of this problems remains very unclear, and as long as there is no resolution, gold prices will remain escalating.

In this turbulent market it's safer to turn to investments that seem to have less variables attached to their rise, and the gold market without CEO scandals, unmet earnings, etc, seems a lot safer. As long as national and global economic turmoil keeps sending investors running for cover behind a golden shield, gold will keep rising, and as things are shaping up there's a lot of room left to climb.

Has the oil rally topped off?

On the last two months oil prices are up a whopping 25%, but is it possible that the oil rally is heading into it's final days? In the last couple of days oil prices have declined considerably from $113.46 to $105.31, raising a lot of questions as to what is oil's next move.

Analysts at Goldman & Sachs said that oil prices will soon brake through the support level of $105, sending oil prices into a downward spiral all the way back to $97 a barrel.

Personally, I couldn't be more thrill if such a marvel occurs. However commonsense shows me a different picture. It may be true that the oil's momentum may be waring off, but the price of oil remains closely attached to any resolution we see to the unrest at the middle east, which remains unrelenting. Libya has reached a stalemate, and upcoming presidential elections in Nigeria may very well determine the direction oil prices go next.

If analysts claim oil prices -despite all of this- will begin a downtrend and finally stabilize reaching levels not seen for three months, then I guess I must see it to believe it. In the mean while I'm walking to the supermarket.

Bring On The Shutdown!

During the Clinton administration democrats lost majority in congress in the 1994 elections creating a divided government like we have now. As a consequence we had the last government shutdown that lasted from Dec 16 1995 to Jan 6 1996. During which the market produced outstanding returns; the S&P surged 26%. How is this possible? Simple, government paralysis means no government regulations. In other words, politicians can't ruin industry's stocks with regulations.

Now don't get me wrong, I don't have anything against some regulation, and the fact that the government can't decide on a budget and is shutting down as a result, isn't a good look for the country, and it's not good news for Americans. However when it comes to the market, I'm thrill about the idea of Washington shutting down. The stock market historically has gotten huge lifts from government shutdowns, and this is always good news for stockowners. Because of a shutdown the market has the chance of focusing on what truly matters, earnings.

"The Social Network" in today's relationships

When you think social network the word Facebook immediately springs to mind. When you think Facebook, you think of friends, pictures, and all kinds of social activity. Facebook is playing a role in today's society that's hard to decide if any company should be playing, being the identity data base of the world. With 500 million users Facebook is now -in population- the third largest country in the world.

It's hard to imagine it all started in a Harvard dorm room almost five years ago. Facebook's CEO and co-founder Mark Zuckerberg was then a regular computer science major working his way through his sophomore year of college. Although Zuckerberg since the beginning always had big expectations, it would of been hard for him to imagine what he would end up creating.

Today Facebook is a major social force that's driving the internet, and society, in the same direction it's heading. Zuckerberg's company -once known as The Facebook- has changed everything about how people interact with each other.

The argument can certainly be made that Facebook has affected, both negatively and positively, how humans relate to each other, but it also depends which side of the coin you're looking at. From the business side of relationships Facebook is a great tool which allows you to easily keep in touch with other people. On the personal side of relationships, however, Facebook could end up having a very harmful effect.

Facebook falls under the category of "social network". The name says it all (keyword being network). The secret to success in business and in life, as best selling author of "Never eat alone", and master networker, Keith Ferrazzi claims, is reaching out to others. As ferrazzi emphasizes in his book "there's no such thing as a self-made man". Every success story, in both life and the business world, leaves a trail behind of those who helped you climb up the stair, and vice-versa. Facebook allows you to do just that; to connect with others, wether it's someone you've known for a while or someone you just met, so you can easily create or maintain a network of relationships with endless possibilities.

Facebook has certainly had a positive impact in business relationships. The Social Network, since it achieve it's massive popularity, has been used as a networking tool to create and strengthen business relationships. It's basic functions, the news feed, the wall, and inbox, are all very powerful tools that come in very handy when building a relationship. In his book "never eat alone" keith Ferrazzi talks about a concept he calls "pinging"( by the way, this is a fantastic book if your interested in learning how to build a lifelong community of colleagues, contacts, and mentors). The concept of "pinging", as Ferrazzi calls it, is the concept of constantly keeping in touch with those people in your network, but whith a small difference as you would normally do it. "Pings" are meant to be short and concise messages that have the sole purpose of telling it's recipient that "you care".

You form business relationships because after all the cake and watermelon there's a chance that you will gain something out of them. That's why these kind of relationships don't require the kind of contact that the deep personal ones do, and why Facebook has proven to be a very powerful tool when it comes to networking.

On the other hand, Facebook has been blamed for being one of the main contributors to the massive build-up of "social capital" -which refers to the relationships within a social network- and the quality of the latter. This increase in social capital could end up affecting personal relationships in two different ways. First, the theory that social networks have led to an increase in the quality of relationships and would ultimately end up replacing face-to-face time, is widely held on this topic. On the other side of the coin however, the argument is made that social networks are creating shallow and impersonal relationships, which consequently are building-up a kind of "social clumsiness" when we actually share face-to-face time.

In my opinion both arguments have valid grounds, but it really comes down to what kind of person you are. If you're the shy kind, that's prone to being uncomfortable when it comes to interacting with others (friends, family, acquaintances, etc), then you're probably better off sticking to building "social capital". On the other hand, if you're the social kind that hardly misses an opportunity to interact with others, then relying on social networking to maintain your network healthy could be a big mistake.

When it comes to relationships, the effect that Facebook will have is still unclear. What is clear, however, is that Facebook holds the future of human social activities on a very tight leash. Where it will take, and ultimately do with this vital aspect of human life -as scary a thought as it may seem- remains to be seen.