Arlo Gilbert’s Blog

I’m sitting here at Newark and my plane departs in 20 minutes. The moment they announced boarding everybody rushes to the front as though they are giving away money inside the plane.

This is a 7 hour flight to Vancouver. What is the hurry to get seated? I understand if you have a huge carry-on that you need to get in the overhead, or even if you’re flying first class because you want to chug your first free drink as quickly as possible… but given that coach class is essentially as comfortable as standing in a New York subway during rushhour, why would people possibly want to spend an extra 20 minutes on the aircraft if they don’t absolutely have to?

Herd mentality at it’s best “everybody is in line, I better get in line too, I better hurry!”.

Ok… now they are making final call and me and 3 other smart passengers are walking up to the gate with no line and will spend 20 minutes of our lives doing something more fun like blogging or watching the news.

See you in Canada eh!

So it’s been about 3 months since my last flight. Why is that do you ask? What does the picture on the left have to do with my lack of flying?

Well, basically that is what flying at night is like and about 3 months ago I took my last night flight. It was… how do i say… frightening. Every blinking light looked the same, the night sky made it visually obvious how many planes were around us at all times, and out of these 9 million blinking lights, supposedly one of them was the runway. In addition to the visual difficulties, my ability to judge my altitude was completely thrown for a loop, 200 feet, 20 feet, 5 feet from the runway all felt the same. Basically like trying to fly while taking LSD and covering one eye. Thankfully my instructor knew which one was the runway but until we were about 40 feet away from the runway I still had a very hard time identifying it. I’m not color blind, have good vision, I guess it takes some practice, in the mean time I plan on avoiding night flying like the plague.

If I ever get stuck up in the air at night, my solution is just to circumnavigate the globe until I reach a country with sunlight.

Seriously though, I’ve gone through my usual personal cycle of becoming completely immersed in work for a few months and at the end of these cycle’s I usually start looking for things to buy and things to do…. So I’m really looking forward to getting back to flying but I’m having an instructor with me at all times until I get over my jitters and get comfortable with landings again.

Ok I admit it… when I was a teenager I was a video game nerd and my favorite game of all time was Street Fighter 2. The graphics were great for the day and age and my friends and I blew every allowance playing for hours during the pizza buffet at Mr. Gatti’s. There were 6 buttons for the game, 3 variations of punch, 3 variations of kick, and a joystick. The moves were easy enough to learn that within 10 minutes, anybody could be good enough to compete.

Time went by and games got more complicated, by the time I was 25 I felt like an old man trying to learn modern video games, 12 buttons, combinations involved lots of different combinations of buttons and joysticks and gamepads… it was overwhelming and I generally thought “if this is gonna be so much work, why don’t I do something that will actually pay off, like meeting girls?”

Then a few weeks ago, my colleague Andy showed me this video game system that you can buy at x-gaming, it’s a full sized video game (the kind you stand in front of with a friend) and it came with none other than Street Fighter II. I bought it immediately.

It arrived, the delivery guys unpacked it, and in 10 minutes I was playing. What a blast I’ve had down in the basement reliving my younger days, eating pizza and drinking beer… it feels so decadent. In any case, if you’ve been trying to find me on icq or aim but I’ve been unavailable…that’s what I’ve been doing with my free time for the past 3 days!

Lately I’ve been looking at the markets and the investment landscape and I’ll admit, I’m a cynic. Of course I was born a cynic and will probably die a cynic. That very cynicism though has kept me out of trouble with investing.

The sub-prime meltdown inspired confidence in the greed of banks and their willingness to hedge their shareholder’s money with high risk investments. Tech companies for the most part have been real losers (except iCall of course )… we see companies like Ford dropping sales by 25%+ in a single month, the dollar is week to the point that just by being an american and keeping your money in cash you are essentially losing money every month. 

All I can do is really just sigh about it, take care of my family, keep my own businesses in order and wonder what the long term outcome of this entire mess will be.. or is that all I can do?

Never one to find a lack of opportunity in the chaos I have plugged money into United States Oil Fund and Fidelity Select Energy Service. I’m not claiming to be a prophet here, but my returns in the past 2 years on money that I have directly invested have been upwards of 40%… and I always make it by investing in (what seem to me) to be obvious winners. At 60 AAPL was a steal.. at 80 people talked about it being overvalued.. they all *knew* there was an iPhone coming, they *knew* what it would do, but they failed to see the forest through the trees and now AAPL is trading at what, 180? 190? I don’t know, I sold at 140.

Before I explain my reason for investing in oil directly through USO, let me explain why I am in FSESX. FSESX is a simple mutual fund, it holds about 50 companies in the energy sector, but it’s real key is that it holds drilling companies, refining companies and the like. These companies are pretty much agnostic when it comes to the price of oil, they still refine, they still drill, they still distribute, they still make money. If oil prices increase demand doesn’t go down in the same economic vacuum that many items do… they stay busy regardless, if oil goes down the demand increases and they see more business… and if new drilling opportunities present themselves (which they must… there are known huge reserves that are not legally drillable right now), the FSESX portfolio overall should see some nice returns. Call it hedging my bets. Currently about 25% of my energy investing is in fidelity fsesx.

So Oil… USO.. why will it continue to climb? Why is this current $143 per barrel “cheap”?

1. Relative to the adjusted dollar, the price of oil and a gallon of unleaded gasoline is about the same now as it was in the 70’s gas crisis. This means that it is one of the few non discretionary purchases that has actually stayed even with inflation. 
2. It’s non-discretionary… what are you going to do? Quit your job? Sell your S.U.V. and start driving an electric car? Build wind turbines on top of your house? Buy carbon credits? No. You’re going to take your medicine whether you like it or not, fill up your car and pay your electric bill. If you’re rich, the gas pump doesn’t affect your wallet, if you’re not rich you can’t afford to quit your job and you likely can’t afford to just buy another car unless you sell your existing one… guess what, dealer’s dont want S.U.V.’s now… you’ll get half of what you paid for it a year ago on something like a Hummer or a Suburban.
3. Worldwide demand is growing. China among others wants their fair share of the western lifestyle which includes lots of gadgets, lots of meat and lots of cars.. this all requires petroleum, china’s economy is strong, and the Yuan is outpacing the dollar by huge margins.
4. This is a LIMITED resource, in philosophy they say that in order to prove a hypothesis as valid, the philosophy has to be taken to it’s end… so if oil is limited, we know that *eventually* all oil will run out.

I’ve gotten this blog moved over to a different host and am now running on a platform that doesn’t require me to use the cludgy old software that I was using. Primarily that was what kept me from posting, but I’m back and should start posting more frequently again.