The Bottom Line

Times they are a Changing

The alternative energy race continues. Exxon Mobil released earnings on Thursday and gave some indications where they are putting their money when it comes to alternative fuel development. Earnings from the oil giant were down 66% compared to a year ago. Considering that oil costs about half as much today as it did a year ago, the results are not surprising. They continue to maintain the expectation that global oil demand will increase 35% between 2005 and 2030. But despite this, they are diversifying, throwing 600 million dollars toward research and development of algae-based fuels. Currently, corn-based ethanol is the leader in the bio-fuels market. As we have opined many times before, the next thirty years will be characterized in the history books as the “Green Era.” Alternative energy is in fashion, and in motion. We will look back to the days of $4.00 gasoline and realize that it was one of the greatest things to happen to this country. Why? Because change rarely comes without pain, and the pain of those prices set into motion the great Alternative Energy Race. We’ll keep you posted on the leaders of the pack along the way. (Source: http://www.marketwatch.com/story/exxon-mobil-profit-falls-66-as-economy-slows-2009-07-30).

We know things are tough in the US economy, but how are things overseas? It depends on where you are looking. Things in Europe, Japan and Russia continue to be bleak. Europe’s banks are a few steps behind in dealing with the mess of the credit crisis. Japan is holding their breath to see if people will spend money once their stimulus dries up, and Russia continues to be solely dependant on oil exports (which are hurting right now). Meanwhile China, India and Brazil have already turned the corner. Their respective stock indices have been on a relentless move upward all year. Rural Infrastructure development for all three of these countries is bringing more available labor, and more opportunities to grow industry. We are watching a metamorphosis taking place, a changing of the guard if you will. The old leaders are loosing ground economically, and new leaders are taking their place. It is a slow process, and will take years and years. Most of us will not see the end result, but we will watch the trend develop. Just as the role of foreign business has changed dramatically over the last 50 years in the automotive industry, it is sure to change over the next 50 in the global economy as a whole. Even the definition of a “foreign company” vs. a “domestic company” is vague. Many “domestic companies” today receive over half their revenue from overseas (i.e. Pepsi and Caterpillar). Likewise many “foreign companies” have significant domestic presence, and provide thousands of jobs right here in the US. The lines have been and will continue to be skewed. Thomas Freidman says that the world is flat and it is getting flatter every day. We think this is right on the money.

The United States Postal Service find themselves fighting red ink. It would not be surprising to see rates of stamps increase from their current level of 44 cents to help fund the difference. They are stepping up efforts to scan letters, converting them to electronic delivery format. The USPS is not the only company having to make changes to cut costs. Efficiencies are being explored like never before in order to run a business in today’s challenging economic environment. Adaptability is the word of the day. The business that can adapt to changes in customer habits, changes in regulations, and changes in credit will be the business that not only survives, but thrives.

Chad P. Wilson, CFP

The above is strictly informational and does not constitute any sort of recommendation. Please consult your own financial advisor for specific tax, loan, or other investment advice.