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Root for $5-a-Gallon Gas

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PAUL B. BROWN
Published: December 10, 2005
GASOLINE prices stubbornly hover near $2 a gallon, but $5 would be even better, writes Spencer Reiss in this month's Wired. The higher the price, he reasons, the more incentive there is to find alternatives.

"For anyone with a fresh idea, expensive oil is as good as a subsidy - with no political strings attached," he writes. "Indeed, every extra penny you pay at the pump is an incentive for some aspiring energy mogul to find another fuel."

And low gasoline prices stand in the way of that, he argues in an article that squarely takes on the conventional wisdom that we are doomed to run out of gasoline - or at the very least destined to pay exorbitant prices per gallon, because of a finite supply of petroleum and rising demand in other countries, particularly Brazil, Russia, India and China.

"For the better part of a century, cheap oil has fatally undercut all comers, not to mention smothering high-minded campaigns for conservation, increased efficiency and energy independence," he writes.

Higher prices suddenly make all those ideas more attractive and give energy companies and entrepreneurs a real reason to look at things like converting natural gas into diesel fuels, or seeing if biodiesel (fuels using vegetable oils) and ethanol are indeed feasible.

And presumably once serious efforts devoted to finding alternatives are under way, the price of those new fuels will drop thanks to breakthroughs and economies of scale.

BUT WAIT, THERE'S MORE. Be they for spray-on hair, his rotisserie, the Pocket Fisherman or some other product we can definitely live without, Ron Popeil's infomercials are deliberately cheesy - and extremely effective.

"I've been on TV every day for the past seven years; in those years, I've spent more than $300 million on air time for my rotisserie alone," he told Andrew Vontz in an enlightening question-and-answer interview in the December issue of FHM.

Following are excerpts:

"My best sales hour was probably $500,000 on QVC. The numbers for selling retail on TV are much larger than wholesale. Sell seven million rotisseries with a retail price of $200 and you've got a nice hunk of change."

"The infomercials have an entertainment value to them. Nielsen did a study for CNBC. On a Sunday at 4 p.m., CNBC replaced their usual programming with my hair-spray infomercial and the audience doubled."

"My bank account has more than $100 million in it and the taxes are paid."


ROCKET SCIENTISTS. Wall Street's "rocket scientists" are cool customers, according to Smart Money. After all, computers do the hard part.

Rocket science is Wall Street's nickname for a quantitative investment approach that creates mathematical formulas to determine when to buy and sell stocks. The algorithms are fed into computers, which do the actual trading. "Emotion is removed from the equation," Nicole Bullock writes. "Fear and greed don't compute."

And unlike flesh-and-blood traders, computers neither fall in love with a stock, which can cause an investor to hold onto it too long, or carry grudges about disappointments, which could keep them from buying once the company turns around.

Better yet, as one of the "quants" put it, "we can do the stock picking without using our brains for a day or a year."

The reason quantitative trading works is that the algorithms are created to spot and exploit inefficiencies in the market. Of course, as buying and selling identify the imperfections, the market adjusts and a new model is needed.

The magazine "surveyed the best quant shops to find out where the dials are pointing" and presents five stocks "the machines say are poised to outperform." The list is AstraZeneca, Goodyear Tire and Rubber, Chevron, Microsoft and Taiwan Semiconductor.

FINAL TAKE. Being a millionaire isn't what it used to be thanks in part to rising real estate prices and retirement accounts. "The number of households with a net worth of more than $1 million rose by 8 percent in 2005 to 8.9 million," Kiplinger's reports. "The secret: sticking to an investment plan." PAUL B. BROWN