While stocks and the market in general have remained at record highs, several big problems are brewing, and they could wreak havoc on your investments.
Recently the Dow has sunk more than 100 points, and oil has dropped below the $45 threshold. Meanwhile, President Barack Obama and his administration are intent on ruining more jobs by destroying the private prison industry. Could this be a pipedream for Obama and the liberals, or will companies such as GEO (GEO, Financial) and Corrections Corporation of America (CXW, Financial) be put out of business in the coming years?
OIl
The price of oil has fallen dramatically. Although the reasoning behind the drop could be motivated by a handful of concerns, most believe it has something to do with the crude supply within the U.S. For the week ending Aug. 26, the crude oil supply within the U.S. increased by 4.5 million barrels, which happens to be one of the biggest increases of the year.
Although analysts expected some increase, they didn’t expect the number to top 1.4 billion barrels of oil. This has taken a toll on the price of crude oil. Stockpiles of crude oil increased by 2.3 million barrels while gasoline inventories only decreased by 700,000 barrels.
The combination has caused investors to become concerned that the global crude oil glut could remain for quite some time unless countries agree to restrict production in the short term. In the U.S., the production of crude decreased by 60,000 barrels, but the amount in stockpiles remains at all-time highs, and the demand isn’t enough to overcome this problem. Good news could be on the horizon. An informal meeting between OPEC members is scheduled to take place in September to discuss a plan for increasing oil prices, as well as other activities in Santa Cruz. As someone who invests in oil, holding your breath and crossing your fingers is the best way to proceed.
Oil analysts have decided to cut their forecasts for oil prices. Thirty-four analysts and economists were surveyed; they set an average price of $45.44 per barrel for oil this year. This is slightly lower than the previous month’s forecast.
Prisons
The Department of Justice has been utilizing third-party prisons to house inmates. These private prisons operate under close guidance of the Justice Department. However, they have come under much scrutiny for distorting the justice system. Not only do these establishments make huge profits, they also cost the government a lot of money.
Just last week, the Bureau of Prisons began contemplating whether to extend contracts with the 13 private prisons, located throughout the U.S. Obama is working diligently to shorten prison sentences, but with the 60% recidivism rate, is it effective to get rid of private prisons? Prison stocks may suffer in the short term, but over time they will probably rebound.
In all likelihood, the Obama administration’s move is a political ploy that won’t hold any water in the long run.
Disclosure: I do not own any shares or any stocks mentioned in this article.
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