PSOJ : Hedging Oil Prices Good Idea: What Baloney.….

One of the tragedies of the PNP’s dom­i­nance of the polit­i­cal land­scape over the last four decades as I have point­ed out time and again is the way it’s can­cer­ous ten­ta­cles has cor­rod­ed and cor­rupt­ed every stra­ta of the society.
In one of the most polit­i­cal yet cyn­i­cal­ly-disin­gen­u­ous dis­play of this cor­ro­sive influ­ence is a state­ment put out by the pri­vate sec­tor orga­ni­za­tion on the issue of the Government hedg­ing oil prices at US$66 per barrel.
In it’s state­ment the Private Sector Organization defend­ed the actions of the Government to hedge oil prices at US$66 per barrel.
The sub­se­quent and con­tin­u­ing drop in oil prices have report­ed­ly already cost the Government in excess of US$20 mil­lion or rough­ly Jam $2.4 bil­lion.

The PSOJ in it’s defense of the Government used the most shock­ing­ly asi­nine met­ric imaginable .
The Organization clear­ly showed that it was pre­pared to sac­ri­fice what­ev­er cred­i­bil­i­ty it may have left in a vul­gar and des­per­ate attempt to resus­ci­tate the image and cred­i­bil­i­ty of the Simpson Miller Administration.

“In light of the hedge strat­e­gy, the Government effect­ed last year by pur­chas­ing an option to buy eight mil­lion bar­rels of oil at US$66, it means the coun­try has lost US$20 mil­lion in fees for the con­tract option. Oil will, how­ev­er, be sup­plied at the cur­rent mar­ket price”. “The only way that we can be sure of an event is after it has hap­pened. In oth­er words much of the com­men­tary today is being made from hind­sight (which is 20/​20). Buying a stock after the price has increased will not give you the ben­e­fit of the price rise, or what is the sense of buy­ing insur­ance after a cat­a­stroph­ic event. And, because an event might not hap­pen, would you then not insure against it,” the PSOJ argued.

This state­ment in and of itself shows the con­tempt these well placed oper­a­tives have for the intel­lect of the Jamaican people.
For the Tsunami of unin­formed who trav­eled from across the Country to Half-Way-Tree decked out in orange and red regalia this state­ment is Gospel . For the rest of us how­ev­er, it is a slap in the face and an affront to our senses.

Smart Investors pick stocks based on the fol­low­ing criteria.
(1) Payout Ratio: According to experts In gen­er­al the low­er the pay­out ratio the bet­ter because the more the com­pa­ny is pay­ing out in div­i­dends the less they are using to build up cash, pay off debt and invest in grow­ing the business.
(2) Dividend growth rate:The Dividend Growth Rate mea­sures the per­cent of growth a div­i­dend has expe­ri­enced over a cer­tain peri­od of time. While many reports will use an annu­al­ized fig­ure, it’s safer to use a five-year div­i­dend growth rate. The longer peri­od of time will give a bet­ter indi­ca­tion of over­all per­for­mance and allow minor ups and downs to bal­ance out.
(3) Yield: high yields can be risky and aren’t always the wis­est invest­ment options.
(4) Net Income Growth rate: Net Income Growth is a mea­sure of the rate of growth in prof­its when com­pared to the pre­vi­ous time period.
(5) ROI : Return On Investment, is impor­tant because it shows an investor how long it will take to earn their mon­ey back from their ini­tial invest­ment. It is com­posed of both the div­i­dend pay­ments and the increase in stock price. It is desir­able for both of these to show a sta­ble, upward trend.

The afore­men­tioned are just a few of the indi­ca­tors indus­try experts say sol­id investors need to look at before they invest in a stock.
Based on the fore­gone the metaphor about stock buy­ing is inap­plic­a­ble, there are clear guide­lines to invest­ing in stock options.
The Insurance angle made even less sense.
Purchasing Insurance because the pur­chas­er under­stands poten­tial future risks is the exact oppo­site of what the Administration did.
The Administration Insured when all the indi­ca­tors sug­gest­ed that the coun­try would final­ly get a break from the suf­fo­ca­tion of high oil prices.
Individuals and cor­po­ra­tions insure against even­tu­al­i­ties, it is not the same as hedg­ing oil prices when all the indi­ca­tors showed that there would be con­tin­ued dete­ri­o­ra­tion of oil prices .
The idea of hedg­ing prices is not nec­es­sar­i­ly a bad idea eco­nom­i­cal­ly speaking.
It becomes a bad thing when the peo­ple mak­ing the deci­sions do not under­stand mar­ket indicators.
It appears that the deci­sion mak­ers suf­fered from this malady.

Here are just a few of the indi­ca­tors which does not require much expertise.
(1) Three of the World’s largest economies were using less import­ed Oil. The United States the world’s largest con­sumer of oil was using more nat­ur­al gas and in the process import­ing less oil.
The United States was also diver­si­fy­ing it’s ener­gy portfolio.
China the world’s sec­ond largest econ­o­my was already show­ing signs of a slowdown .
Brazil an emerg­ing econ­o­my was rely­ing less and less on import­ed fos­sil fuel and invest­ing in and con­sum­ing more diver­si­fied energy.
The Iran nuclear deal was in the works as well which when con­sum­mat­ed would mean a lot more oil on the world market .
Overall there were many more indi­ca­tors which any person/​s mak­ing the deci­sion to hedge oil prices at US$66 per bar­rel should not have missed.

This is an inde­fen­si­ble act of incom­pe­tence or poten­tial­ly a lot more than meets the eye. Once upon a time the Jamaican pri­vate sec­tor was a rep­utable orga­ni­za­tion which rep­re­sent­ed the pri­vate sec­tor regard­less of who formed the Government.
Over the years all of that seem to have van­ished leav­ing in it’s stead anoth­er arm of the PNP as is the case in lit­er­al­ly every sec­tor of nation­al life includ­ing the clergy.