What are gas prices in your area?

I filled up over the weekend in the Northern Suburbs of Chicago (specifically the Lake Zurich area) and paid $3.70 a gallon for regular unleaded.

A week ago, I filled up in the Western Suburbs for “only” $3.48 a gallon.

You can definitely feel the pinch as prices soar towards $4.00.

But where it really hurts is those businesses that rely on cars and trucks. If you’re a cab driver, it’s hurting badly. What about a plumber who drives her truck from job to job? Even jobs like house painter or realtor where there’s quite a bit of driving are going to feel the pain.

Across the nation, the cost of diesel fuel is crushing trucking companies. From the Business Review:

Joey Champagne said he doesn’t need a calculator to figure this year’s profits at his waste-hauling company.

“I’m running my business at a loss,” said Champagne, who operates Champagne Carriers Inc. out of the Port of Albany.

It’s not due to lagging sales–Champagne’s business is booming. Total income for the 50-person company topped $10 million in 2007, up from $6.8 million in 2006.

The weekly fuel bill to operate his 60-truck fleet has increased about $30,000 to $100,000 over the past year.

Every time you order a pizza, the delivery guy is taking it in the wallet. Ditto for flower deliveries:

Gallo, of Frank Gallo & Son Florist, said he hasn’t raised his delivery fee of $11.95 in two years. The company delivers throughout the Capital Region.

Holding the line on delivery fees hurts, especially because Gallo’s suppliers have passed their fuel costs to him. He figures their fuel surcharges have increased by about 35 percent in the past two years.

“We talk about that internally on a daily basis–as to whether we have to increase our delivery fee based on fuel costs,” Gallo said.

Suspending gas taxes

John McCain recently said that he would suspend the gasoline taxes in order to bring down gas prices. Would it help?

The federal gasoline tax is 18.4 cents per gallon. State gasoline taxes average 29 cents per gallon; in New York, it’s more than 41 cents a gallon, one of the top three highest rates in the country.

A poll conducted in March by Rasmussen Reports, a public opinion polling firm, found that 60 percent of Americans think the federal gasoline tax should be suspended until gasoline prices come under control.

The Federal tax goes towards transportation projects. If you suspend the tax, you have to come up with the money from some place else.

Same with the state taxes.

If gasoline surges to $4.00 or $5.00, would 40 cents really make that much of a difference?

Consumers will use less as prices rise. Businesses don’t have much of a choice- or else they go out of business. But many will add on a gasoline surcharge to their customers.

That’s inflationary.

But then, you already knew that.

Gold saw its largest one day drop since 1980 yesterday, when it plunged $59. As a percentage drop, it wasn’t as bad as the one in 1980 (when gold was priced lower) but it wasn’t fun either.

Commodities were off sharply yesterday and the selling continued in Asia overnight.

Investors are dumping anything even remotely commodities related.

There is a panic in the commodities pit. Investors that had large gains are now trying to get to the exit with something still intact. It isn’t pretty.

Some said yesterday that the bubble had “burst.”

Bubble? What bubble?

Because gold and crude were at record highs it MUST be a bubble? I have talked about this before. There was no bubble in the commodities sector (not yet anyway.) Crude was frothy- given the inventory numbers the last few weeks. It was trading higher mainly on the weak dollar and, yes, speculation. But it wasn’t a Bubble.

Just because something goes up in price a lot- doesn’t make it a bubble.

But there is no doubt that interest in commodities has risen. Gold has been up 7 straight years. Eventually, someone is bound to notice.

From the NYTimes:

“Right now is a very scary time” for commodity market regulators, said Michael Riess, a director of the International Precious Metals Institute, a consultant to commodities investors for more than 30 years. “It’s not a question of overregulating or underregulating. It’s a question of just being swamped by volume, volatility and a dramatic shift toward speculative interests.”

Right now, the speculators are running for their lives. This is normal and healthy in a bull market. Nothing grows straight to the sky.

Once the commodities trade off sharply, the herd will forget about them again (for awhile, at least.) They’ll forget until gold or wheat hits another new high.

The panic could be scary. We could see a huge drop here. Or, maybe not. My guess is we will.

Don’t let the fear overtake you. The #1 rule for investing is to buy solid companies.

Anytime Wall Street is this scared, there are opportunities. Be ready to grab some when the time is right.

HGTV is running a special House Hunters episode every night this week featuring million dollar homes. I bet a lot of you are watching it. House Hunters is HGTV’s most successful show.

I admit it- I really like House Hunters International. Who wouldn’t want to live on the beach or buy an italian villa? Since I can’t afford that, I can at least live vicariously through these people on the show.

These shows are still popular because Americans are still obsessed with real estate.

Despite the current housing market downturn, everywhere I go I still hear people talking about real estate. They are “waiting” for the right time to buy that Miami condo on the cheap or that Las Vegas house for pennies on the dollar.

But really, most of these people aren’t salivating over the price drops because they want a place to live. They still see it as a good investment. Many homebuyers still believe that in a year, prices will be going back up so they’d better get in now.

They’ll be wrong.

As is common when bubbles burst, the asset class changes, but the mindset doesn’t. It will take years for people to realize that the housing boom isn’t coming back.

Look at the tech stocks. Even eight years after the bursting of the dot-com bubble, investors still speak in awe of Microsoft’s stock. I know of some investors still “waiting” for it to go back to $100 a share so they can be “rich.” (It’s currently trading at around $27.) They’re going to be “waiting” a long time.

Again, this is common human behavior.

But look around you. While everyone is still obsessing about housing, another Bull is already galloping.

This Bull has been galloping along for about 5 years now.

And, still, no one notices.

By the time the herd notices, and starts to invest in it, it’ll be too late.

What am I talking about?

Commodities.

I’ve been talking about them on this site for over a year.

While most Americans have been going to open houses, the commodities bull has been galloping along. And now he’s gaining speed. He’s not at the full-blown charge yet. But he will be.

Do you even notice?

The real estate boom is over. That investment is done. I still think people should own a home for stability and to have a place in which to raise their family. And the tax break isn’t bad either.

But as an investment? Forget the Miami condos. That’s a loser and will be for 20 years.

The next Bull is already upon us.

Do you notice?

The smart investor does.

I’ve talked about copper frequently- especially the “smart” aspects of the metal. Investors like to call it “Dr. Copper” because it seems to signal, in advance, that the global economy is hot.

Copper is an industrial metal, so when there is high demand for it, things are hopping.

Copper is now closing in on the psychological $4.00 a pound level. Its all-time high was an intraday trade of $4.16 hit in May 2006. The metal didn’t hold those levels however, and quickly traded back under $4.00.

Will it hold them this time?

This is an odd position for copper to be in. If the global economy were truly slowing, copper usage should be down as well as prices. However, inventory is low in London as China, the #1 consumer of copper in the world, keeps buying.

There are also other factors at play, including the falling U.S. dollar, which are pushing investors to invest in copper. From Reuters:

“General commodity strength has certainly supported copper as investors look for an alternative investment vehicle,” said Eric Wittenauer, futures analyst with A.G. Edwards in St. Louis, Missouri. “Most of what you’re seeing is buying as related to an inflation hedge and investors moving into the commodities which continue to perform well in an environment where equities and bonds are weak and not performing as well.”

Honestly, I never thought I’d see copper at the 2006 levels again. It had been treading under $3.50 for most of last year. Even $3.50 is an elevated level with a slowing economy.

The new highs seem to ask the question: maybe the global economy isn’t slowing after all?

The US has clearly slowed demand for copper use. Most of the demand is from home building which has come to a screeching halt in the last 8 months. The US is the #2 copper market.

Yet Dr. Copper is still moving higher.

A conundrum to be certain.

How do you invest in copper?

There are several large copper companies that the average investor can invest in such as Freeport McMoran (FCX) or Southern Copper Corp. (PCU). But in recent sessions, those stocks have not been surging along with the price of copper.

Perhaps those investors are as suspicious of this rally as I am. Precious metals seem more likely to go higher than copper at this point. But the “fundamentals” of supply and demand appear to support these higher prices (for now.)

I’m skeptical however. If copper breaks and holds $4.00 then we’ll see.