Connect the Dots: Oil Up; GM and Ford Shares WAY Down

Robert Farago
by Robert Farago

The perfect storm we predicted is rapidly approaching hurricane force. Whether or not you believe Motown's automakers could have predicted the soaring price of gas (hint: they could have at least hedged their bets a little), it's increasingly clear that the truck-heavy domestics are in deep, deep shit. The price of oil has jumped again today; this time on rumors that Israel is about to attack Iran over their nuclear weapons program, "disrupting" Iranian oil supplies. Bloomberg reports that OPEC President Chakib Khelil predicted that the military threat– and the falling value of the U.S. dollar– may drive oil prices from their current price ($143 a barrel) to $170 a barrel. Meanwhile, Goldman Sachs has declared that supply and demand, rather than speculators, are responsible for oil's rally. All of which has raised gas prices, killed the U.S. new car market, murdered light truck sales and torn a hole in Ford, GM and Chrysler's balance sheets. Tomorrow is Black Hole Tuesday for The Big 2.8, when the full horror of the sales stats are revealed. In anticipation of this bad news, The Detroit News reports that GM stock hit a 34-year low ($10.57). Ford's stock tumbled to $4.46 a share. Barron's reports that late last week, "some [funds] designed for individual investors are selling at about 50 cents on the dollar-almost as if GM were headed for bankruptcy." Almost?

Robert Farago
Robert Farago

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  • Rix Rix on Jun 30, 2008

    Own oil stocks. They are not great investments but will protect you against a rise in prices. If the price of oil falls, the stocks will fall but you will be paying less for gas. Wall St. calls this a 'hedge.'

  • Taxman100 Taxman100 on Jun 30, 2008

    One reason we keep troops in Korea, Japan, etc. is not so much to keep Russia and China at bay, but to keep South Korea from starting a war with North Korea, and keeping Japan from remilitarizing.

  • DearS DearS on Jul 01, 2008

    Well I do not want disaster, its just too exciting. I can do just fine in a disaster I guess. I'm probably ready. I can drive less, buy smarter, educate myself, learn to feel more relax and be patient. Disaster is a blessing of sorts. I can change my own oil and brakes and lots of other parts. I shop online. I eat healthy. I let my self enjoy like and be enthusiastic and positive about my responsibilities. I can practice some faith also. Warnings are good opportunities for growth. And its ok to fear the future....I few words of wisdom. Fear- Fuck-Everything-and-Run False-Evidence-Appearing-real Face-Everything-and-Recover For-Everything-A-Reason Finding-Everything-and-Realizing Failure-Expected-And-Received Future-Events-Appearing-Real Finding-Excuses-and-Reasons False-Expectations-About-Reality Forgetting-Everything-is-All-Right

  • Ricky Spanish Ricky Spanish on Jul 01, 2008

    Didn't Barrons tell us to buy GM a few weeks ago?