Yahoo Finance, Energy Concerns and Their Effects on People - Assignment Example

Place holder for title page, edit according to submission requirements} Introduction Yahoo! Finance offers the knowledge and opinions on a wide range of topics by 17 different money experts. Their advice is often scholarly, practical, and thought-provoking, but one thing it is not is contradictory. There are few if any columns that offer conflicting opinions on even broad subjects. There are, however, a few columns that address related topics, or different aspects of the same topic, and if taken together these can provide invaluable insights into certain areas of personal finance. Energy and the environment are concerns for every person on the planet, and are also a source of opportunities and pitfalls for those who are simply trying to manage their personal finances. This paper will examine four columns by Yahoo’s financial experts that discuss different sides of the energy issue: “A Second Look at Ethanol Investing” by David Jackson; “Readers Turn Green, Save Same” by David Bach; “Oil’s Increasing Threat to the US Economy” by Dr. Jeremy Siegel; and “A Cold, Hard Fact: Prepare for Higher Heating Costs Now” by Suze Orman. Whether one is a big-time investor or just trying to make the most of a weekly paycheck, these articles are relevant and helpful and well worth a closer look. “A Second Look at Ethanol Investing” by David Jackson In his article of February 14, 2008, David Jackson takes a look at some of the issues affecting investing in ethanol. Ethanol, of course, is big news, and has been since 2005, according to Jackson; its main use, apart from being the intoxicating element in alcoholic beverages, is as an additive to fuel. This presumably helps reduce the amount of oil used by consumers, and is more environmentally-friendly. Jackson explains that the U.S. Congress mandate that the country consume seven-and-a-half billion gallons of ethanol by 2012 was seen as a financial boon by many, and the ethanol industry initially enjoyed a huge windfall of investment money. The realities of ethanol production and use, however, have in Jackson’s words “sobered up” some investors, so that some ethanol-related companies suffered a quick decline in their stocks. Jackson points out that rational discussion of the issue is affected by many vested interests and passions, and so states that the purpose of his article is to attempt to provide an objective picture, since he has no personal stake in the ethanol industry. The picture that Jackson presents of the use of ethanol is largely negative. He describes three types of ethanol production – from corn, sugar, and waste products – and points out that the energy, cost, and environmental benefits of each are subject to wide debate. Corn-based ethanol, which is mostly produced in the U.S., may in fact be an energy-negative process, meaning that a gallon of ethanol yields less energy than it takes to produce it. In addition, the conversion of land for corn crops may actually contribute to the build-up of greenhouse gases in the atmosphere, something the use of ethanol is intended to prevent. Sugar-based ethanol, produced and used widely in Brazil, has a better energy output than corn, but is expensive in the U.S. due to high tariffs meant to protect the domestic sugar industry. And in both the case of corn and sugar ethanol, the use of these crops for fuel drives up their prices, which in turn affects food prices. The third method, using waste products to produce ethanol, seems more promising, but is technically challenging to produce on a commercial scale. Jackson concludes his article by stating that there is no clear favorite as yet among the three ethanol options, and implies that the very idea may not actually be a very good one. “Readers Turn Green, Save Same” by David Bach This article, posted on April 7, 2008, is about how energy efficiency and environmental concern at a very simple, personal level can save money. Bach offers a number of suggestions, such as taking advantage of energy-saving programs offered by utility providers, getting rid of a car, using filtered instead of bottled water, and growing vegetables at home, as different, easy ways in which the average household can save money and help the environment at the same time. All his suggestions are supported by examples sent in by readers of his regular column. Bach’s article is partly practical and partly philosophical, which is perhaps a good way of showing just how much money is a part of everyday life. The message is: be kinder to the environment, and you will be happier and have more money to spend on other things. Bach’s reader-contributors seem to be happier, at least, and if his figures are correct, his suggestions would indeed save the average family a significant amount of money. “Oil’s Increasing Threat to the US Economy” by Dr. Jeremy Siegel Dr. Siegel, who is a professor at the University of Pennsylvania’s prestigious Wharton School, wrote this article on July 2, 2008 at a time when oil prices were at historic high levels. The article details how high oil prices affect the entire economy, not just from the large amounts of money leaving the country to buy oil from foreign producers, but also from the effects on the costs of producing and transporting goods. These higher costs have an impact on ordinary consumers in two ways: directly, in the form of higher prices, and indirectly, in the form of reduced productivity, which harms jobs and wages. Dr. Siegel’s article is a brief but informative description of how a large worldwide issue can have an impact on individual businesses and consumers. Even though oil prices have dropped considerably from the $140 a barrel they were at the time his article was written – Dr. Siegel made the presumption at that time that prices would stay very high for much longer – the points he makes are still very valid. And he does make a useful observation that higher oil prices encourage conservation and innovation, which can be profitable for attentive investors. “A Cold, Hard Fact: Prepare for Higher Heating Costs Now” by Suze Orman Posted on August 7, 2008, Orman’s article is intended to be a practical guide to relieving the certain higher costs of home heating in the U.S. in the upcoming winter months. Mostly driven by higher oil prices, all energy costs are going to be higher according to Orman, anywhere from 10% more for electricity to 40% to 45% more for heating oil and natural gas. Her advice, not surprisingly, is to prepare for these higher costs before winter arrives, and by doing so hopefully save some money. Orman offers four specific areas for her readers to think about. First, she suggests taking advantage of special payment plans offered by utility companies that spread payments out over time and help avoid unusually large seasonal bills. Her second suggestion is perhaps the most obvious one, which is to winter-proof one’s home. Third, she suggests considering cost-saving steps in such seemingly unrelated areas such as cable or internet service or health insurance coverage; downgrading service features or paying a little more for insurance deductibles, she says, can save a considerable amount of money over the long run. And finally, Orman suggests that her readers reconsider the amount they spend for the Christmas holiday, which is most people’s largest expense during the winter. Energy Concerns and Their Effects on People All have the articles have one common theme: the cost of energy has a negative effect on individuals. The Jackson and Siegel articles are about larger aspects of the energy economy, while the Bach and Orman articles address more personal details. The high price of oil, for example, causes increased costs for businesses as Dr. Siegel describes, which in several ways increases the cost of goods for consumers. At the same time, consumers feel the effects of higher oil prices directly in the increased cost of keeping themselves warm in the winter, as Orman describes. Dr. Siegel’s article is the most scholarly, and the most worrisome because it describes the far-reaching effects of high oil prices. Money spent to buy oil is money that cannot be used to buy more raw materials to produce goods; fewer goods being produced means that the price of those goods will be higher. Increased oil prices mean that fewer goods can be transported for the same cost. The price of goods goes up as a consequence, either because the supply of goods to consumers is reduced, or the price is raised to compensate for higher transportation costs, or perhaps both. Money spent by businesses on increased costs cannot be used for growth and expansion, and if businesses cannot raise their prices high enough to cover their costs they may be forced to downsize, which puts jobs at risk. It is a very stark message to individuals: not only will personal income be increasingly attenuated by high oil prices, the income itself is at risk because of them. Jackson’s article, while mostly discussing the ethanol issue from an investment standpoint, also illustrates some of the less obvious but wide-ranging negative effects of high oil prices. Ethanol, the most common alternative to oil for both cost and environmental reasons, seems to create almost as many problems as it solves. Corn and sugar, the sources of ethanol, are also food sources. They cannot be used for both at the same time. At best, the increased demand for these crops for use as fuel will increase their prices as food. At worst, using too much corn and sugar – which are basic ingredients in many food products – for ethanol may lead to food shortages along with higher prices. These two articles define a problem, which in its simplest and most frightening terms is: high oil prices cause increased financial costs for individuals, may cause them to lose their jobs, and possibly starve. The two articles by David Bach and Suze Orman provide at least partial answers by providing ways that people can at least mitigate the effects of the problem, if not actually solve it. They offer a number of practical suggestions about ways that individuals can manage the increasing costs of everyday life. Some of the suggestions, such as taking advantage of money-saving offers from utility companies – something both authors mention – seem very simple and painless. Likewise, Bach’s idea of starting a little vegetable garden and Orman’s suggestion to pay some attention to weather-proofing the house are reasonably normal. Many people would read those things and simply appreciate the reminders about things they probably already knew. Other suggestions, however, are more unusual and might seem to some people to require a painful change in lifestyle. Automobiles are not just transportation for many Americans, they are an extension of their personalities; Bach’s suggesting that people give them up, sensible as that may be, will be hard for some people to accept. And Orman’s advice to spend less on Christmas is an even more radical idea. Have things gotten so bad that parents might not be able to buy Christmas presents for their kids? Suze Orman is an experienced and respected financial writer; if she thinks so, maybe it’s something worth thinking about. What These Writers Are Saying About Personal Finance These articles present a very negative picture of personal finance. When taken together, the message they convey is this: The ability of individuals to manage everyday needs is being adversely affected by things beyond their control, and the only way they can relieve the hardships these things cause is to stop spending so much money. In none of these articles do the writers offer any advice as to how to make money grow through investing or saving; the only article that even touches on the issue of investing, that of David Jackson, actually discourages it. Rather, the focus is on “stopping the bleeding” so to speak; not making one’s money grow, but keeping it from disappearing so quickly. One aspect of the tone of these articles that reinforces this message is that the articles that deal with the broader picture – Jackson’s and Siegel’s – are more negative than those of Bach and Orman that deal with the things that people can do on a personal level. They seem to be saying that the only thing anyone can do is to think positively and try to make the best of things, since the problem is so large it cannot be solved, and the only rewards anyone can really hope for are emotional rather than financial ones. Conclusion As was mentioned at the beginning of this paper, the one thing that seems to be missing from the collection of articles that are available at Yahoo! Finance is a dissenting point of view. There is not, for example, an article that counters the points of David Jackson that ethanol may be economically impractical. As a matter of fact, there are not more than two articles available at the present time that address the same aspect of personal finance, and those that are close, like the ones written by David Bach and Suze Orman, strongly support each other. As for those latter two articles, the advice that they offer is reasonably incontrovertible, and while they are offered in response to the issue of high and rising energy costs, they would seem to be valid under any circumstances. It is difficult, after all, to argue that sensible spending and taking steps to save money are things that people should not be doing. Likewise, the articles by Jackson and Siegel are worthwhile in that they encourage taking a deeper and broader look at issues that affect personal finance, even though some of their details may be subject to disagreement. Overall, however, one might feel that they are being presented only one point of view in reading the articles in Yahoo! Finance. When money is involved, no matter how correct or useful that one point of view may be it is usually a good idea to seek other opinions, if for no other reason than to confirm the validity of the first ones. References Bach, David. (2008) Readers Turn Green, Save Same [Internet], 7 April 2008. Yahoo! Finance. Available from: [Accessed 20 September 2008]. Jackson, David. (2008) A Second Look at Ethanol Investing [Internet], 14 February 2008. Yahoo! Finance. Available from: [Accessed 19 September 2008] Orman, Suze. (2008) A Cold, Hard Fact: Prepare for Higher Heating Costs Now [Internet], 7 August 2008. Yahoo! Finance. Available from: [Accessed 20 September 2008] Suze. (2008) mber 2008]vailable from: Read More