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Tuesday, October 14, 2008
Oil, Gold, Dollar Decline Amid New Government Plans
Donna Fuscaldo
FOXBusiness
The price of oil was trading a bit lower again Tuesday after suffering days of declines, as traders digested the ramifications of new bailout measures amid the continued weak economy.
Crude oil futures ended down $2.56 at $78.63 on the Nymex, but that wasn't as precipitous a fall as many of the daily declines have been lately.
“Confidence has been so awful,” said Douglas Smith, chief economist, for the Americas, at Standard Chartered Bank. “The markets are happy the government is finally coming out with a holistic approach to this whole problem instead of doing little pieces here and there.”
Earlier Tuesday Treasury Secretary Henry Paulson and the Federal Reserve Chairman Ben Bernanke outlined plans to purchase equity in banks to persuade banks to begin lending at reasonable rates again by shoring up their balance sheets.
The moves by the government had a positive effect on oil initially, though the rally lost momentum as the session went on.
Other energy stocks ended lower as well. Nymex RBOB gasoline settled down 3.28 cents, or 1.7%, at $1.8848 a gallon. November heating oil settled down 3.5%, or 8.13 cents, at $2.2597 a gallon.
The dollar was down on the day, with the euro at $1.3687 from $1.3585 late Monday. One greenback was fetching 101.67 yen from 101.97 yen, according to EBS. The British pound was up to $1.7476 from $1.7356, and the dollar was valued at 1.1323 Swiss francs, from 1.1379 Swiss francs late Monday.
December gold futures on the Comex division of the Nymex declined $3 to $839.50 an ounce.
FOX Translator
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Some mutual funds want you to pay for the privilege of them (or your investment adviser) taking your money to invest. It's called a load, and it works like a cover charge to get into a nightclub. Luckily, there are such things as no-load funds. As the name implies, shares of these funds are sold without a fee paid to a broker or investment advisor.
The entire amount you invest in no-load funds goes to work for your returns. On the other hand, with load funds, right off the bat you're charged commission (not to mention other fees incurred over the life of the investment). Let's say, for example, you invest $25,000 into a load fund that charges a 5% commission. This costs you $1,250 off the top, bringing your actual investment down to only $23,750.
The often-cited horse race analogy argues against investing in load funds. Here's the logic behind it: Would you place a bet on a horse that had to start a race 200 yards behind the others? Well, maybe you would if you got a tip from a sketchy, trench coat-clad man in a dark alley. However, under most circumstances, it's not smart to put your money on that handicapped horse.
But some argue that at times that man in the trench coat (aka your broker) knows more about the horses than you do, and has a better shot at picking a winner. Also, sometimes these fees are unavoidable because some funds are available only through investment advisers.
Cost-benefit analysis can help determine when a load fund is worth it (in other words, when it will score you a load) and when it is better to "do it yourself" and avoid the fees. Load-fund fees range depending on share class and can cover a variety of costs, such as paper work and fund management.
