Oil, Salaries and Silliness

As I was watching a favored financial show this morning, 2 debates jumped out at me. Both seemed relatively silly and after a little thought, I decided both were silly.

First up is the price of oil on the various markets. Well, guess what. The price is up. And talking heads are lining up to blame "speculators." Maybe they need to define what a speculator is before spouting off. From my perspective, speculator is another name for an investor. And, like all investors - large and small - they want to to see their investment increase in value.

Since the topic is oil prices, all manner of goofiness intrudes. The most common thread in these debates is the intentional running up of the price by 'speculators.' Well, that is just plain goofy. Any object is only worth what someone will pay for it. Period. You may think your fancy watch is worth $250,000, but until someone hands you a quarter-million, it is not worth anything. Same with oil futures.

They are only worth what someone will pay. If I hold oil futures that I paid $75 a barrel for, and want to sell them at a profit, then I need someone willing to pay more than $75. Basic market principle. If buyers only want to pay $70, then I get to choose to keep them or trade them at a loss. If buyers want to pay $80, then I get to make a profit. But, until I actually sell them, they are not really worth anything to me other than a barrel of oil.

And that is what drives oil prices - a willing buyer. There is no evil plot to raise oil future prices. There are, however, willing investors to pay the current price. Otherwise it would fall. Since the price seems to be rising, I can only assume that there are willing buyers at the current price.

If nobody wanted to pay the price being asked, then the price would drop. Same with everything from milk to gold. To somehow single out oil because of its importance and claim that price rises are somehow artificial is to basically deny the reality of a capitalistic society. Oil futures are traded on an open market. Sellers and buyers come together and agree on a price. Now, the reasoning the buyer has for paying that price is varied and, frankly, not significant.

Much like everything else in our society, oil is more about hyperbole and blather. A political point to be scored and recorded. Reality - just another commodity on the market. Traded daily and priced daily. Don't like the price of oil? Don't buy it. Simple market economics.

Which brings me to paychecks. Reports out over the last day or 2 indicate that Wall Street and the banks are set for a record total payroll. Thee will be much screaming and pontificating about the evils of high pay or the virtue of high pay. Either way, it is a silly debate. Unless a firm is still on the public dole (TARP, et al) then what they pay their people is between employee and employer. In the case of public companies, the employer side includes the shareholders.

And there will be the usual moaning about CEO pay, trader pay and so on. Who cares? Does anybody bemoan the leviathan salaries celebrities and athletes pull down? Not like the CEO pay screaming. And who does this screaming? Well paid TV talking heads. If you ask one of them how much their paycheck is, they won't tell you. They will tell you it is none of your business. And it is not. Nor is anyone's paycheck a topic for public banter - unless that paycheck is somehow funded with tax dollars - be they public employees or TARP babies.

But the yelling will commence and go on. Pointlessly, I might add, since no company seems to set its pay practices based on public opinion. Nor should they. As long as they are using their own money, companies get to pay their people what they want. That is how it works in the private sector.

Which brings me to my last point this morning - public employee pay. This is our business since it is our money. There was a time when the phrase "public servant" had a meaning. It meant someone working for the government at a lower than average pay level because it was public service. No more.

Government workers at all levels are out earning private sector employees. When you add in the benefits packages government workers get, the difference is startling. It would be all too easy to simply blame Obama and go to lunch. But this has been building for years and years. Not just at the federal level. State and local are just as bad or worse.

Now Congress wants to get into the act. The same Congress that automatically gets a pay raise every year unless they vote not to. The same Congress that earns around $175,000 each for what is effectively a part time job. Yes, part time. They only actually meet 40 weeks a year and then only 3 or 4 days a week. Talk about overpaid.

This is really a simple one. Freeze all government salaries until they get their budgets under control. Including the endless flow of perks and privileges to the 530 members of Congress. Them most of all. They created this mess - let them suffer the price for it.

Better yet, come November, lets fire the lot of them.