MolloMarketReport

After last week’s sell off of over 3% today we had a feeble attempt at a bounce, that see – sawed around unchanged and eventually closing slightly up for the Standard and Poor’s (+0.07 or +0.01% to 1318) and slightly down for the Dow (-.33 or -0.00003% to 11,842.36. The Nasdaq did have some movement as it was down -0.85% or -20.35 to 2,385.74. The two headed dragon was again the story on Wall Street and may have been the reason for the tepid bounce. Although it was the inflation / oil story that seemed to be the most dominant.

The meeting in Jeddah, Saudi Arabia seemed to be a non-event as the Saudis pledged to boost output by a measly 200,000 barrels a day. To put that in perspective the Saudis current output per day is 9.5M barrels, so the increase is only 2.11%. Nigerian rebels also caused some havoc for Royal Dutch Shell and Chevron and that was said to have been a factor in the price rise. Oil prices rose $1.38 to close at 136.74.

Also in politics it was bring out your kooky ideas day for oil. McCain came out with the offering of a $300M prize (or $1 per American) for someone to invent a more fuel efficient car battery. Democrats on the hill have continued their attacks on “oil speculators” by considering restrictions on pension funds, hedge funds, investment banks. Lately there have been a slew of ideas good and bad coming from politicians including Bush / McCain’s proposals to up offshore oil drilling, the Democrats call for a windfall profits tax on oil companies, McCain’s proposal to temporarily lower / eliminate the oil tax for Americans, and more investment in alternative energy. I don’t know if we should be happy at this form of collective brainstorming or worried that some of the worst ideas will come to pass. Most of these ideas are worse than doing nothing at all. The best possibility would be investment in alternative energy. In fact in this regard the government is probably coming late to the party. Certainly in Silicon Valley green startups are garnering a lot of attention. If done wisely (difficult for governments sometimes) the investment could pay handsome dividends. McCain’s idea for the $300M giveaway is in that vain and is similar to the X prize which does get some government support, if not money.

The country really does need sound energy policy. Congress should stop looking around for people to blame and focus on creating that policy. There seems to be a lot of technology already existing or in the works that could be adopted. CAFÉ standards could be improved if the hybrid and other alternative engines are used more often. Tax breaks that had gone toward oil exploration could go into this area. The government could also take steps to curb energy use such as replacing fleet cars with hybrid only automobiles or implementing LEED protocols in all new government buildings. How about some solar panels on the White House? It really seems as that if some cooler heads prevailed our energy problems could be curbed significantly while improving the shape of the economy. Green venture capitalist Vinod Khosla has said there will be a great boom to the economy from the green revolution. Other countries have energy needs as well, maybe America could have something to export again.

There is also the do nothing option. I don’t mean nobody does anything, but the US government doesn’t do anything. Or at least read lightly. As I said there is a lot of venture capital going into various green start ups. It seems that the internet grew at an amazing clip throughout the 90’s without government intervention. Imagine if they did, would they have chosen to fund Google or Webvan? In the green revolution both will happen. Some ideas will turn out to be fantastically successful, and others will fall flat. And we don’t want to be hanging on to a bloated green tech version of Webvan just because it is in an important congressman’s district.

In other financial news the other dragon head, the credit crunch / financial woes, is still snapping its teeth. Citigroup announced that it had already slashed half of the 6,500 investment bank jobs it is planning to cut, Goldman is also cutting jobs, and AIG’s earnings were downgraded.

David Mollo

Trackback URI | Comments RSS