Happy New Year Bearkats! I’m Michael Gorbaty, the bearded bald student who trades stocks and securities in the computer lab next to Starbucks in between classes. I am an economics student here at Sam Houston State University and a chef wannabe. Being in economic classes, I have developed my business-minded personality. I am a trading addict who loves to trade everything from stocks to commodities. What healthy person doesn’t love food or preventing student loan debt? However, this article is not about my love for cooking Thai food. In this column I will bring to you the most current and in-depth market news and how it affects you and me.
For some, market news is very confusing and frustrating, so they decide to open up the sports section instead. For me, stocks, options, currencies and bonds come very easy. Why gas prices fluctuate because of crude future price movements comes easy to me. You may not understand what I just wrote, but you will soon. I get your frustration and hope to clear up financial news through simple and easily understood methods including charts, graphs and common language. I want you to be comfortable reading the business section by reading my column. If you can understand everything from stocks to corporate junk bonds, you are one step ahead of your peers. The major reason for this series is for your financial comfort. Investing as a young person and taking risks is beneficial towards you earning more long term. As a young person, you have your entire life to make up for losses where someone who is retiring is not able to do so.
The market news that I will cover will range from major corporation stocks like Apple to Kroger and Starbucks. I will also cover foreign exchange (currencies), commodities, bonds and other varying market news that is important.
Here is a lot about me: I always have been and always will be an investor. I grew up in Los Angeles and moved to Houston to work in the environmental treatment industry in 2011. I spent three years working as an operating technician for a small business that offered thermal oxidation services to refineries throughout the gulf coast to avoid EPA (Environmental Protection Agency) fines. I spent at least two out of the three years living in a hotel room and my suitcase. I got to see first-hand the ins and outs of the pipeline, marine transportation and refining industry. Since age 13, I have spent every day reading the Wall Street Journal, whether in print or digital online. I picked up trading securities when I was 13 for one simple reason, my father. My father subscribed to the New York Times and the Wall Street Journal in my high school years to improve my reading comprehension; little did he know it would spike my business and trading interests.
The biggest news I want to cover is the massive drop in crude prices and the major effects. Crude is traded in two major forms. Both WTI (West Texas Intermediate) and Ice Brent Crude have dropped from over $100/barrel to under $50/barrel, over 50 percent in the last few months. For those that don’t know, crude is traded as a future in the derivative market. The derivative market is a market in which energy and commodity prices fluctuate second by second. This market has products that have physical assets tied to the price, like crude. Crude prices fluctuate because banks, hedge funds (massive pools of money managed by a team of people who buy and short anything and everything), institutional and individual investors buy and sell it. The price of crude is also affected by demand of the population and the refineries throughout the world; if the majority of traders are selling crude the price will fall. When looking at the rise and fall of the current prices of crude, one could say it resembles a boom to bust era. What I mean by this is what made the crude industry so prosperous is making it fall. In case you don’t know, the industry discovered a new way to extract crude through fracking and horizontal drilling. Both of these methods discover crude quicker and in more supply. Fracking uses extremely high pressured streams of chemicals and water through rock beneath the surface that allows trapped crude to escape upwards. Horizontal drilling allows drilling companies to tap into crude deep beneath the land thousands of feet in any direction from the current drilling location. This method allows drilling companies to extrapolate crude from beneath other’s land. The improvements in discovering crude have created a massive oversupply of crude driving the prices downward. The two major areas in which crude has been tapped is arriving from the Permian basin in western Texas and the Bakken formation in North Dakota. The U.S. has stepped up its position on the ladder competing against Russia and the Middle East. The advent of fracking and horizontal drilling sparked crude traders into buying the future driving up the price to over $100 a barrel over the last couple of years. And since the beginning of Fall 2014, traders have been selling in massive amounts, driving down the prices by over 50 percent. I have been one of those traders selling ice brent crude futures. For the last two months I have been selling these futures through my own brokerage account. As I type this I am thankful for lower gas prices and more income from crude futures, despite the possible long term negative effects it can create in the job market and small to mid-sized oil companies. Don’t forget, you can find me in the library computer lab Monday to Friday and Sunday evenings in the computer lab trading my young life away.