Wednesday, June 04, 2008


This turn has peaked out of the bushes a few times only to hide again. Gold peaked at $1,030 some months ago. Wheat peaked some weeks ago. Oil peaked a couple of weeks ago.

This week, GM announced the closure of 4 truck factories and for the first time since 1992 Camry's and Corolla's out sold the Ford F Series. This week, several cities began offering lower priced bus tickets for early or late trips. San Francisco took seats out of buses to give more standing room. A Gulf Stream Jet that consumed $2,000 per hour in fuel 3 years ago, consumes $6,000 per hour today. Even corporate executives are starting to park the Gulf Streams. The fact that commercial fares have gone is like reporting that the cost of subway tokens has gone up. Subway fares have risen but the increase is nowhere near the increase the total fuel expense of an SUV.

It took a long time to make the turn. The turn does not mean that the price of fuel has to drop by some huge percentage, but it could.

The key point is that the savings from taking the bus or the commercial plane are substantial. At least the froth is coming off the price of oil. We should all expect for mass transit to do well for the next several years.

In regard to the banks; they will do well when it is clear that the inflation bug has been squashed. If oil prices stay flat, the inflation rate on oil will be zero. Since inflation is the caboose of the economic train, it will be the last to go down the hill.