Thursday, March 30, 2006

Tornado Watch, but not Q4

This Author is staring out his window, which he is not supposed to do, as he is in a Tornado Watch. It was not the last Quarter of last year, which ground down to a 1.7% Growth rate in the Economy. Many Economists are going on Record saying that We have recovered the Q3 pace of last year, but One must remember that the first Quarter of this Year enjoyed a drop in Energy pricing, which has since been lost. I additionally believe revision of Q1 estimates will drop a percentage point of the perdicted 4% Growth rate.

The Spot markets are pushing Sweet Crude close to $67 per barrel. What is the longterm consequences of this Price runup? Economists have been proclaiming that there is little sign of Energy Costs impeding the Economy. Q4 of last Year, though, may be the Indicator Quarter of the Energy Cost impact. I personally believe increased Energy Costs are impacting the Economy harder than the increased Fed base rates.

The real question is: How does Energy Costs affect the Economy? This basically is answered by Business management decisions. Common Economist rote details Operational Costs increases result in immediate constriction of Capital investment. This may not be the Case, where there is a Tax structure in place which penalizes for Investment reduction--saved Funds resulting in heavy taxation. The Investment Schedules thereby may be the last to be amended. The Personal touch may be the impulse, with perdicted Cash shortages in the distant future driving current Stock Options, Stock Grants, Pay raises, and distribution of Profits to Stockholders. This means a personal distribution of Funds before Operational Costs absorb accumulated Funds. Everyone awaits the cutback in Consumer Spending, the cutback of Government Spending, and eventual rise in Taxation by grabbing the Cash now. lgl

No comments: