Tags: inflation | oil | copper | gasoline

Caution: Higher Gasoline Prices Ahead

By Sean Hyman   |   Monday, 28 Jan 2013 07:36 AM

Well, I’ve got good news and I’ve got bad news.

The good news is that the global economy is continuing to heal and recover (slowly but surely). The bad news is that it’s driving up demand for global oil supplies. You know what that means when demand increases upon a finite supply. The price goes up. And that’s what is happening right now in the oil market.

West Texas Intermediate crude oil just broke its latest downward correction around the middle of this month and Brent crude followed suit by breaking its latest downward correction last Wednesday to Thursday.

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Now normally I’d be sweating bullets about this since I own a Lincoln Navigator and a Z06 Corvette, which both use premium octane fuel.

However, as these costs increase on me, I’ve got stock positions in my brokerage account that benefit from oil’s rise and more than offset the rise in my fuel costs.

I’ve positioned my Ultimate Wealth Report subscribers for this moment in time too. I’ve got them in four foreign oil companies, two of which pay an almost 5 percent dividend yield each year.

Overall, they’re priced cheaper relative to their earnings when compared with Exxon Mobil or Chevron, and their dividends are far superior.

Are you positioned properly for this next upward move in oil and gasoline prices? Or are you only a victim and held hostage to these rising prices?

You see, many Americans are not only not saving and investing right now, they’re pulling money out of their 401(k)s and IRAs just to survive. So how will they cope with these rising costs? Not well.

Bu then there’s another segment of America who still holds a job with a decent wage and has a 401(k) that they’re contributing to, but they don’t know how to properly invest their 401(k) money. They get in when it “feels good” to do so and they stay out when it feels like they should stay out. In doing so, they miss the best valuations and they get back in once corporate valuations are high again. A recipe for disaster. In addition, they are typically invested in things that don’t deal well with inflation.

You see, most companies pay a huge cost because of rising inflationary pressures. The costs of materials go up, the costs of transporting those goods to their locations to sell their goods increases, etc. So many companies are fighting a tough battle.

However, if you own an oil producer and oil’s price climbs, the reserves that you own go up and your profit margins can actually widen since your costs are somewhat fixed yet the price you can get for it in the market just increased. So an oil company is on the right side of the inflation game. They can benefit from these rising costs.

Copper is in most products that are made. So if I own a company/stock that makes household appliances, electronics, builds homes, make cars, etc., I’m held hostage to these rising costs. Yet, if I own a company/stock that is a copper miner, then I can benefit as these prices rise because the copper that I’m sitting on just went up in value and the price that I can get for my copper just went up. So it’s not a bad day for the copper miner like it is for the user of copper (which is much of the rest of the world’s corporations).

Investigation: China Secretly Stockpiling Gold

You will find that most 401(k)s, IRAs and regular stock brokerage accounts are positioned so that they’re still on the wrong side of the inflation game.

In the Ultimate Wealth Report, we making rising inflation our friend, as rising inflation helps our stocks go higher over time. That’s the type of scenario you want to protect yourself from these rising costs and to beat the market’s overall return over time.

About the Author: Sean Hyman
Sean Hyman is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He is also the editor of Ultimate Wealth Report. Discover more by Clicking Here Now.

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