Comments on: Crude/gasoline price disparity and the 321 crack spread http://www.1stMillionAt33.com/2007/04/gasoline-crude-oil-sands/ A site to share my tips, tools, and humble thoughts on the journey to wealth Wed, 17 Mar 2010 18:12:32 -0700 http://wordpress.org/?v=2.8.5 hourly 1 By: reetha http://www.1stMillionAt33.com/2007/04/gasoline-crude-oil-sands/comment-page-1/#comment-4583 reetha Wed, 03 Sep 2008 07:36:00 +0000 http://www.1stMillionAt33.com/2007/04/gasoline-crude-oil-sands/#comment-4583 The second thing I want to point out is the faster appreciation of gasoline over crude in the last couple month, which can be seen from the following two charts. Specifically, $GASO has seen 10 consecutive weeks of increases. Obviously, it means the consumer’s pocket book is being hit a lot harder than the headline oil price is suggesting. ------------------------------ reetha <a href="http://www.crackcocaineaddictiontreatment.com" rel="nofollow">Crack Cocaine</a> The second thing I want to point out is the faster appreciation of gasoline over crude in the last couple month, which can be seen from the following two charts. Specifically, $GASO has seen 10 consecutive weeks of increases. Obviously, it means the consumer’s pocket book is being hit a lot harder than the headline oil price is suggesting.
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reetha

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]]> By: ML http://www.1stMillionAt33.com/2007/04/gasoline-crude-oil-sands/comment-page-1/#comment-2674 ML Mon, 02 Apr 2007 15:54:41 +0000 http://www.1stMillionAt33.com/2007/04/gasoline-crude-oil-sands/#comment-2674 Shadox, I understand the point you're making and readily admit that matching dividends to expenses may not optimize the portfolio return. However, as Doug pointed out, the "sleep at night" factor also needs to be considered. This is especially true for someone banking on investment income for living expenses. I would not and do not use such an allocation for my entire portfolio. But I think quantifying and hedging one's individual inflation exposure has a lot of merit. Shadox,

I understand the point you’re making and readily admit that matching dividends to expenses may not optimize the portfolio return. However, as Doug pointed out, the “sleep at night” factor also needs to be considered. This is especially true for someone banking on investment income for living expenses.

I would not and do not use such an allocation for my entire portfolio. But I think quantifying and hedging one’s individual inflation exposure has a lot of merit.

]]> By: Ray http://www.1stMillionAt33.com/2007/04/gasoline-crude-oil-sands/comment-page-1/#comment-2671 Ray Mon, 02 Apr 2007 11:29:34 +0000 http://www.1stMillionAt33.com/2007/04/gasoline-crude-oil-sands/#comment-2671 Shadox, ML is not invested in Canadian Oil Trusts specifically to offset higher gas prices. I believe you are reading into his statement that he is able to offset higher gas prices which the dividends from trusts. You do have a point in your post on investing to optimize total portfolio returns, but in ML's case he is just pointing out that his trusts offset the cost of the higher gas. Shadox,

ML is not invested in Canadian Oil Trusts specifically to offset higher gas prices. I believe you are reading into his statement that he is able to offset higher gas prices which the dividends from trusts.

You do have a point in your post on investing to optimize total portfolio returns, but in ML’s case he is just pointing out that his trusts offset the cost of the higher gas.

]]> By: dong http://www.1stMillionAt33.com/2007/04/gasoline-crude-oil-sands/comment-page-1/#comment-2669 dong Mon, 02 Apr 2007 00:09:34 +0000 http://www.1stMillionAt33.com/2007/04/gasoline-crude-oil-sands/#comment-2669 While I believe most people don't need to use an asset to expense allocation plan, I think on basic level it can make lot sense as there are fundamentally many different types of risk. The common risk we talk about as regards to investing is volatility risk, and that's where diverisfication is important. However the other type of risk is exposure risk. Matching Assets to Expenses is form of hedging or insurance. Just in the same way I don't go ahead any buy insurance to cover all the houses in my neighbordhood, I might want to buy assets (or more likley avoid assets) related to either my income or my expenses. This is why I don't buy significantly in the energy sector as I have significant exposure already via my job, and why I might have higher exposure to the personal technology industry if I were an enourmous consumer of personal electronics. I'd hardly recommend using this a basis of investing, but I do think it's good way of thinking about risk. Risk is individual and people should tailor their portfolio not only to their level of risk tolerance (volatility tolerance), but also to their personal situation (risk exposure) While I believe most people don’t need to use an asset to expense allocation plan, I think on basic level it can make lot sense as there are fundamentally many different types of risk. The common risk we talk about as regards to investing is volatility risk, and that’s where diverisfication is important. However the other type of risk is exposure risk. Matching Assets to Expenses is form of hedging or insurance. Just in the same way I don’t go ahead any buy insurance to cover all the houses in my neighbordhood, I might want to buy assets (or more likley avoid assets) related to either my income or my expenses. This is why I don’t buy significantly in the energy sector as I have significant exposure already via my job, and why I might have higher exposure to the personal technology industry if I were an enourmous consumer of personal electronics. I’d hardly recommend using this a basis of investing, but I do think it’s good way of thinking about risk. Risk is individual and people should tailor their portfolio not only to their level of risk tolerance (volatility tolerance), but also to their personal situation (risk exposure)

]]> By: Shadox http://www.1stMillionAt33.com/2007/04/gasoline-crude-oil-sands/comment-page-1/#comment-2668 Shadox Sun, 01 Apr 2007 21:44:03 +0000 http://www.1stMillionAt33.com/2007/04/gasoline-crude-oil-sands/#comment-2668 In my opinion, the sector investment strategy that you propose is far from optimal. Here is my point: you are trying to cover certain expenses from dividends generated from the specific related industry sector. However, your optimal investment returns do not necessarily come from the sectors that best match your expenses. Your goal should be to maximize investment returns, not to cover specific expenses. Would it matter to you if your asset appreciation came from the tech sector even though you have practically no tech related expenses? In addition, the strategy you outline can lead to a portfolio that is not sufficiently well diversified if you have higher expenses that you attribute to a given industry sector. So my advice is to optimize total portfolio returns for your acceptable level of risk, not to try to assign portions of the portfolio to cover specific expenses. In my opinion, the sector investment strategy that you propose is far from optimal. Here is my point: you are trying to cover certain expenses from dividends generated from the specific related industry sector. However, your optimal investment returns do not necessarily come from the sectors that best match your expenses.

Your goal should be to maximize investment returns, not to cover specific expenses. Would it matter to you if your asset appreciation came from the tech sector even though you have practically no tech related expenses? In addition, the strategy you outline can lead to a portfolio that is not sufficiently well diversified if you have higher expenses that you attribute to a given industry sector.

So my advice is to optimize total portfolio returns for your acceptable level of risk, not to try to assign portions of the portfolio to cover specific expenses.

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