Peak Oil What To Do When The Wells Run Dry

During the oil crisis of the 1970s to the rapid rise of oil prices during the early part of the twenty-first century, concerns surrounding the use and availability of this non-renewable resource greatly increased in the minds of many. One theory that always seems to creep up when oil prices rise is the idea of peak oil, which is a hypothetical date at which the world's crude oil production will peak. Every day after this would mean lower production levels and an ever decreasing supply.

Simply put, when the world's oil producers combined can no longer increase their oil output, we will have reached peak oil. Oil will be increasingly difficult to find and extract because there will be less of it and fewer deposits to find. Although the steady depletion of oil is a certainty if we assume oil is a finite resource, optimists don't see peak oil through the doom-and-gloom perspective of some. Peak oil may be decades away, and all the hype in the meantime serves a purpose by spurring progress in setting up alternative energy sources. By the time peak oil arrives, it is hoped that alternative sources of energy will be in place. While there are as many peak oil proponents as there are detractors, in this article we will look at how you can make money on this potential event. Peak Oil Implications DemandDemand for oil has consistently risen globally. Should demand continue to rise when total output has reached its peak, basic economics tells us that oil prices will steadily rise with demand. And when production falls - which will occur when oil becomes harder and harder to find - oil prices will rise at a much greater rate. Oil exploration will become much more aggressive, and alternative oil sources - such as Canada's oil sands - will be increasingly exploited to squeeze out every last drop of oil. Alternative EnergyAlternative energy sources will become much more popular as countries are forced to move to a sustainable energy supply, and as fossil fuels simply become too expensive. The way we live our lives would dramatically change if oil-based energy becomes economically out of reach. For example, people will probably live closer to where they work, leaving municipalities strained in their attempts to provide adequate transit as well maintain social services and infrastructure at a much higher cost. When and if peak oil does arrive, it needn't be all doom and gloom. It can be a major investment opportunity as there are areas in the market that will benefit. Some of these investment opportunities include: Oilfield ServicesAs the amount of reserves oil companies hold starts to diminish, oil companies will need to increase oil exploration and drilling to replenish reserves - after all, they are in the business of selling oil. As oil producers increase spending on exploration, it is the oilfield services sector that will win by receiving more orders and seeing higher revenue. Oilfield services companies provide the tools and equipment required in the exploration of oil including drilling rigs, offshore rigs and transport equipment. Therefore, with a dramatic increase in drilling, oil field service companies are likely to be in demand, making them a hot investment. The Oil GiantsInvesting in the top guns of the oil industry is a good bet, peak oil or not. If peak oil is reality, the steady decline in supply will drive the price of oil up causing each company's oil inventory to steadily increase in value. This will result in higher valued stocks for these companies. Basically, the higher oil prices are, the more oil and derivative products will be sold, which should increase profits. Alternative Sources of OilAs conventional oil is depleted and becomes harder to find, oil companies will increasingly look to unconventional sources to boost production. Additionally, higher oil prices brought on by higher demand and lower production make these alternative oil sources financially feasible. The oil sands in Canada and Venezuelaare examples of such an unconventional source, where bitumen - a heavy crude oil - is mixed together with sand and clay. This substance is extracted and refined to produce oil. Oil shale is another alternative. Extracting oil from oil shale - rock containing kerogyn that can be converted to synthetic crude oil - is an even more intensive process than that of the oil sands. Oil shale production is only a viable alternative when oil prices are over $70 per barrel. Some processes exist that convert coal to synthetic oil. However such methods will likely only be interim alternatives because coal is also a finite resource. Alternative EnergyThe most obvious option in the peak oil dilemma is to move to something other than oil for our energy needs. This option isn't yet as feasible. Alternative energy only accounts for a small percentage of energy sources, but the onset of peak oil will force society to look elsewhere to meet its energy needs. If the optimists are right and peak oil is decades away, we have time to develop new technologies to harness alternative energies. But with the hype generated by high oil prices and peak oil speculation, this industry is getting a boost. Because such a very small percentage of our energy sources include alternatives to oil, it could be said that the market for these products has nowhere to go but up. Energy sources such as geothermal, solar and wind energy will be sought after as solutions. Additionally, because many of the technologies that harness these energies are built using oil dependent machinery, there will be an additional push to develop technology for this purpose as well. Hybrid and electric cars have become increasingly popular in recent years due to high gasoline prices. Expect a greater degree of growth in this area with the arrival of peak oil and higher prices at the pump. All of the technology required to produce alternative forms of energy will need further research and development to ensure greater efficiency and economic viability. Investments in the companies leading these R&D initiatives will likely bear much fruit. As oil production falls and oil prices rise, research will become more intensive as industry puts both feet forward to develop the next generation of energy technology. Investments to Avoid In general, the investments to avoid in a peak oil situation include companies that rely on oil and other petroleum products as a major input cost. For example, transportation companies and airlines are susceptible to price fluctuations in oil and would be hurt by the extremely high prices that would be the result of a peak oil situation. Conclusion Peak oil brings with it several opportunities for investors. Whether it's oil, oil field services, or alternative energy, investors can cash in on this phenomenon. But be careful. If we reach peak oil, it will mean dramatic changes to society in the way we live and do business. Watch your investments closely and be sure to adjust to a changing marketplace.

Why Gold Matters

While economic recessions usually draw many comparisons to The Great Depression, so far there has been little (if any) historical precedent to the monetary and fiscal stimulative policies that our country embraced in the fall of 2008. For many investors, gold has never been seriously considered as a long-term investment.

Yet in investing, to completely dismiss an idea simply based on reasons that are ultimately based on pre-existing views is not an intelligent idea. If anything, one should examine the situation for his or herself and come up with an independent reason as to whether or not an investment is to be made. The Gold ConundrumThe topic of investing in gold came to the forefront of many investors' minds during the 2008-2009 recession. The most obvious reason for this is due to the rise in the price of gold. Market watchers love to sensationalize any stock or asset class that is experiencing a rise in price as the next possible investment to latch on. Yet the rise in the price of gold happened largely due to people buying physical gold or betting on the shiny metal through various investment options, such as ETFs or gold miner stocks. Problems with Gold as an InvestmentBefore jumping on the gold bandwagon, I often find it instructive to first examine reasons why investing in gold holds fundamental problems. Only by realizing these issues will you be able to make an intelligent decision with regards to gold investing. The main problem with gold is that, unlike other commodities, gold does not get used up. Once gold is mined, it stays with you. A barrel of oil is turned into gas and other products that are used up. Grains are used to feed us. Gold on the other hand is turned into jewelry, used in art, or stored in vaults. Jewelry can be melted to make other things, but gold's chemical composition is such that it cannot be used up. The only way gold disappears from our society is if it lost or buried. Because of this, the supply demand argument that can be made for commodities like oil, copper, grains, and so forth doesn't hold up for gold. History Overcomes This ProblemHowever, unlike other commodities, gold has been with human societies since the beginning of time. Empires and kingdoms were built and destroyed over gold. As societies developed, gold was universally accepted as a satisfactory form of payment. In short, centuries of history have given gold a power unlike any other commodity on the planet. Peter Bernstein's book "The Power of Gold" offers a wonderful look at gold's hold on societies over the centuries. And that power has never really disappeared. The U.S. monetary system was based on a gold standard until the 1970s. Proponents of the gold standard argue that this monetary system effectively controls the expansion of credit and enforces discipline on lending standards since the amount of credit created is linked to a physical supply of gold. It's hard to argue with that line of thinking after nearly three decades of a credit explosion in the U.S. led to the financial meltdown in the fall of 2008. In investing, you can't ignore the effect of human psychology when it comes to gold. Gold has always been a go-to investment during times of fear and uncertainty. Periods of fear and uncertainty go hand in hand with economic recessions and depressions.  The Great Recession of 2008 is set to have profound effects on our economic system for many years to come. These periods of market uncertainty tend to benefit gold. From a fundamental perspective, gold is generally viewed as a favorable hedge against inflation. Gold functions as a good store of value against a declining currency. Investing in GoldThe easiest way to gain exposure to gold is through the stock market, in which you can actually invest in actual gold bullion or gold mining companies. Investing in gold bullion won't give the leverage that you get from investing in gold mining stocks. As the price of gold goes up, miners' higher profit margins can boost earnings exponentially. Suppose a mining company has a profit margin of $200 when the price of gold is $1000. If the price of gold goes up 10% to $1100 an ounce, the operating margin of the gold miners goes to $300, a 50% increase. Of course, there are other issues to consider with gold mining stocks namely political risk (since many operate in third world countries), and maintaining gold production levels. The most common way to invest in physical gold is through the SPDR's Gold Shares (NYSE:GLD) ETF, which simply holds gold. When investing in ETFs, pay attention to net asset value (NAV) as sometimes the purchase can exceed NAV by a wide margin, especially when folks are optimistic. Gold mining companies include Barrick Gold (NYSE:ABX), Newmont Mining (NYSE:NEM), Goldcorp (NYSE:GG), and Anglogold Ashanti (NYSE:AU). Passive investors who want great exposure to the gold miners may consider the Market Vectors Gold Miners ETF (NYSE:GDX) which includes investments in all the major miners. Alternative Investment ConsiderationsWhile gold is a good bet on inflation, it's certainly not the only one. Commodities in general benefit from inflation, since they having pricing power. The key consideration when investing in commodity-based businesses is to go for the low-cost producer or producers. More conservative investors would consider inflation-protected securities like TIPS. The one thing you don't want is to be sitting idle in cash thinking you're doing well when inflation is eroding the value of your dollar. For younger investors, the best investment is to invest in yourself. Anything that increases your earnings power is a wonderful hedge against inflation. ConclusionGold certainly matters, especially during times of uncertainty surrounding government monetary and fiscal policies. Monetary policies that depreciate the dollar and lead to high inflation will always benefit gold.

Why You Should not Manage Friends Money

So you put away some nice returns this year - not too shabby. While you can't be blamed for bragging about good performance, it's not uncommon for friends to want a part of the action. What would you do if a friend asked you to make investments on his or her behalf? In this article we'll show you the highs and lows of investing for others.

Taking Advantage of Your Financial Knowledge It's no surprise that your pals might want you to manage a couple of bucks for them. If you're pulling down decent returns and talking about your investing strategies, you've now become the go-to guy (or girl). These days, money talks, and people who understand the financial world are getting a lot of respect as young people realize there's more to investing than they once thought. If you have financial knowledge, people who know you might view you as a very valuable commodity - a free money manager. All too often, the person asking you to invest his or her money is the person who knows a little something about investing - just enough to get into trouble. If you're nailing double-digit returns this year, why couldn't you repeat the performance year after year, right? The Problems with Investing for OthersYou may think that investing for someone else is just a way of helping out a friend, but the thing is, when you start investing for other people, particularly your friends, you enter a world of complications that you might not have foreseen when you started out. Unrealistic ExpectationsThat friend of yours - the one who thinks that your 35% returns this year are going to happen next year as well - might be in for a nasty surprise when your picks make next to nothing. When you invest for friends, you have to deal with unrealistic expectations that can really put a damper on a relationship. If your friends wants you to invest for them, they likely don't understand all of the risks involved with investing, including not quite meeting the investment goals that they may have been projecting. Losing a Friend's Money Not meeting a friend's investing expectations could jeopardize your friendship, but falling short of your friend's projected returns could be a best-case scenario. When things go wrong, making some money is a lot better than losing money, which isn't an abstract concept for anyone who invests actively. When you bring money into a relationship, things can get uncomfortable pretty fast, especially when that money is hemorrhaging out of an investment account. Do you tell the friend to suck it up? Do you repay the person out of your pocket? Do you try to make up the difference with new picks? Really, there probably isn't a good way to deal with losing a friend's money and you should consider this risk before you agree to invest for anyone. Legal MattersManaging a friend's money is a sticky business, and if you go through with it you may be breaking the law. Investment professionals must be registered with the Securities and Exchange Commission or have a federal license. They are heavily regulated by the government and by trade organizations (like the National Association of Securities Dealers) for the protection of consumers. If you invest for a friend (usually for compensation), you could be breaking laws that are in place to protect investors from people who aren't qualified to have discretionary control over others' accounts. Short End of the Stick Despite the drawbacks, investing for friends isn't always doomed to failure. With skill, smarts and a whole lot of luck, you might rake in the cash. If that's the case, you still have to consider whether or not your friend is taking advantage of you. Helping out a friend is nice, but when that help consists of making significant amounts of money for that person and getting little or nothing in return, you might be suffering from an off-balance relationship. What You Can Do for FriendsNow that I've taken the wind out of your sails (and your friend's as well), there are things that you can do to help your friends' investments without burdening yourself with the substantial responsibility of investing someone else's money. One of the best ways to lend a hand is to help teach your friend about investing. Help Them Learn      There are a lot of pitfalls out there for new investors. If you're lucky, you've been able to avoid quite a few of them or you learned how you should have gone about avoiding them. The benefit of your experience can be one heck of an asset to pass on to a friend and it won't cost either one of you personally or financially. Therefore, if you want to help your friends, work with them - show them how to analyze a financial statement, how to execute a trade online, how to look up business news, or how to find online resources. Investment Clubs Going farther still, there is a popular way to invest hands-on with friends without taking on the responsibility that an investment advisor would feel for a client - the investment club. The investment club consists of a group of people who vote to decide whether or not to buy or sell their group-owned investments. Investment clubs are great because they allow a more personal approach with actual investments than just helping someone with investing concepts. These clubs will also give you a vested interest in performance of your friend's portfolio. If you're interested in starting an investment club, there are plenty of resources available, ranging from your broker to the internet. It's important to recognize that an investment club isn't just a couple of people who want to invest together - it's a formal (and legally defined) organization with members who have an equitable claim to their assets. This means you should look into the rules and laws that govern investment clubs where you live before joining or starting one yourself. Conclusion      Investing for a friend usually isn't worth the amount of trouble it can cause. Money just isn't something you want to bring into a good friendship. In the end, by helping your friends invest on their own, you'll be doing them (and yourself) a much bigger favor.

Momentum Indicates Stock Price Strength

Market momentum is measured by continually taking price differences for a fixed time interval. To construct a 10-day momentum line, simply subtract the closing price 10 days ago from the last closing price. This positive or negative value is then plotted around a zero line. The formula for momentum is: M = V - Vx Where V is the latest price, Vx is the closing price x number of days ago.

What it MeasuresMomentum measures the rate of the rise or fall in stock prices. From the standpoint of trending, momentum is a very useful indicator of strength or weakness in the issue's price. History has shown us that momentum is far more useful during rising markets than during falling markets; the fact that markets rise more often than they fall is the reason for this. In other words, bull markets tend to last longer than bear markets. Technicians use a 10-day time frame when measuring momentum. You will see the zero line in the chart below. If the most recent closing price of the stock is more than the closing price 10 trading days ago, the positive number (from the equation) is plotted above the zero line. Conversely, if the latest closing price is lower than the closing price 10 days ago, the negative measurement is plotted below the zero line. By measuring the price differences over a set period of time, we can start to recognize the rates at which the stock price is rising or falling. Momentum will help you recognize trendlines. Distinct trendlines develop as the stock price increases; a rising momentum plot line above zero indicates that an uptrend is firmly developing. A plot line starting to level off indicates to technicians that the latest price of the stock is about the same as it was 10 days ago; thus, the velocity of the trend is slowing. The reversal is also true. It is important to understand that when the momentum indicator slides downward below the zero line and then reverses in an upward direction, it does not mean that the downtrend is finished. It merely means that the downtrend is slowing down. The same is true for the plotted momentum above the zero line. Figure 1: Microsoft Stock Data February 2001 - August 2001 Source: TradeStation In Figure 1, a very clear trend develops in mid March. Over the next five weeks, the stock price moves in an extremely strong momentum from about $50 to $72-$73. A two-line simple moving average over the same period of time would show a clear crossover, indicating a strong buy entry point. Conclusion It is important to understand that momentum, albeit a very good indicator for determining price movement and subsequent trend development, must be used with other indicators to be an effective buy/sell indicator.

Is Your Forex Broker A Scam

If you do an internet search on forex broker scams, the number of results returned is staggering. While the forex market is slowly becoming more regulated, there are many unscrupulous brokers who should not be in business. Fortunately, they eventually get weaned out.

However, when you're looking to trade forex, it's important to know which brokers are reliable and viable, and to avoid the ones that aren't. In order to sort out the strong brokers from the weak, and the reputable ones from those with shady dealings, we must go through a series of steps before depositing a large amount of capital with a broker. Trading is hard enough in itself, but when a broker is implementing practices that work against the trader, making a profit can be nearly impossible. Separating Fact from FictionWhen faced with all sorts of forums posts, articles and disgruntled comments about a broker, we must remember that many traders fail and never make a profit. Many of these disgruntled traders then post content online that blames the broker (or some other outside influence) for their own failed trading strategies. Thus, when researching a potential forex broker, traders must learn to separate fact from fiction. In many cases, it may seem to a trader that a broker was intentionally trying to cause a loss. Complaints such as: "As soon as I placed the trade, the direction of the market reversed;" "The broker stop hunted my positions;" or "I always had slippage on my orders, and never in my favor" are not uncommon. These types of experiences are common to all traders, and it is quite possible that the broker is not at fault. New forex traders often fail to trade with a tested strategy or trading plan. Instead, they make trades when psychology dictates they should. If a trader feels the market has to move in one direction or the other, there is a 50% chance he or she will be correct. When the rookie trader enters a position, often he or she is entering right at a time when their emotions are waning; experienced traders are aware of these junior tendencies and step in, taking the trade the other way. This befuddles new traders and leaves them feeling that the market - or their brokers - are out to get them and take their individual profits. Most of the time this is not the case, it is simply a failure by the trader to understand market dynamics. On occasion, losses are the broker's fault. This can occur when a broker attempts to rack up trading commissions at the client's expense. There have been reports of brokers arbitrarily moving quoted rates to trigger stop orders when other brokers' rates have not gone to that price. Luckily for traders, this is not likely to occur. One must remember that trading is usually not a zero-sum game, and brokers primarily make commissions with increased trading volumes. Overall,  it is in the best interest of brokers to have long-term clients who trade regularly and thus sustain capital or make a profit. The slippage issue can often be attributed to a psychological phenomenon. It is common practice for inexperienced traders to panic; they fear missing a move, so they hit their buy key; or they fear losing more and so they hit the sell key. In volatile exchange rate environments, the broker cannot ensure that an order will be executed at the desired price. This results in sharp movements and often slippage. The same is true for stop or limit orders. Some brokers guarantee stop and limit order fills, while others do not. Even in more transparent markets, slippage occurs, markets move and we don't always get the price we want. Therefore, often what is perceived as a scam is just the trader not understanding the market he or she is trading. The Real Problem Real problems can begin to develop when communication between a trader and his or her broker begins to break down. If a trader does not get email responses from his or her broker, the broker fails to answer the phone, or provides vague answers to a trader's questions, these are red flags that a broker may not be looking out for the client's best interest. Any arising issues should be resolved and explained to the trader and the broker should also be helpful and display good customer relations. One of the most detrimental issues that may arise between a broker and a trader in this case is the trader's inability to withdraw money from a trading account. Protecting YourselfProtecting yourself from unscrupulous brokers in the first place is ideal. The following steps should help: Do an online search for reviews of the broker. Take what is said and filter it based on what was said in the first section; could this be just a disgruntled trader? In the same search,  find if there are outstanding legal actions against the broker. Make sure there are no complaints about not being able to withdraw funds. If there are, contact the user if possible and ask them about their experience. Read through all the fine print of the documents when opening an account. Incentives to open account can often be used against the trader when attempting to withdraw funds. For instance, if a trader deposits $10,000 and gets a $2,000 bonus, and then the trader loses money and attempts to withdraw some remaining funds, the broker may say he or she cannot withdraw because the bonus cannot be withdrawn. Read the fine print and make sure to understand all contingencies in regards to withdrawals and whether incentives impact withdrawals. If you are satisfied with your research on a particular broker, open a mini account or an account with a small amount of capital. Trade it for a month or more and then attempt a withdrawal. If everything has gone well, it should be relatively safe to deposit more funds. If you have problems, attempt to discuss them with the broker. If that fails, move on and post a detailed account of your experience online so others can learn from your experience. Note: It should be pointed out that a broker's size cannot be used to determine the level of risk involved. While big brokers get big by providing a certain standard of service, the 2008-2009 financial crisis taught us that a big or popular firm isn't always safe. What If You're Already Stuck With a Bad Broker? Unfortunately, options are very limited at this stage, however, there are a few things you can do: Read through all documents to make sure that your broker is actually in the wrong. If you have missed something or failed to read the documents you signed, you may have only yourself to blame. Be stern with your broker, but not rude. Point out the course of action you will take if he or she does not adequately answer your questions or provide a withdrawal. Steps may include posting comments online, reporting the broker to the regulatory authority or marking them as a scam on forex "policing" sites  SummarySupposed scams are often nothing more than traders not understanding the markets they are trading, and then blaming the broker for their losses. But there are times when brokers are at fault. A trader needs to be thorough and do research on a broker before opening an account. If the research looks good, then a small deposit should be made, followed by a few trades and then a withdrawal. If this goes well, then another deposit can be made. If you are already in a problematic situation, you should verify that the broker is doing something illegal, attempt to have our questions answered and if all else fails, report the person to the regulatory body.