Energy Prices On The Rise
ROMANS: It was supposed to be Saudi America. We are producing a lot more oil and natural gas, but are you feeling it? The promise of thousands of new jobs and lower energy bills nowhere in sight. And this summer, driving the car, running the AC is getting more expensive. Gas prices have surged after dropping just a few weeks ago. Take a look at this. From the July 4th holiday weekend until Monday, you got gas prices up 17 cents a gallon. Electricity prices are also rising. Check out the change at the wholesale level in some of the country's biggest trading hubs. In Massachusetts, up 101 percent; in New York State, up 65 percent; Washington, Oregon, Illinois, Arizona, and California, all with huge gains. Why? The Energy Information Administration says it's because of the rise in the price of natural gas; that's used to make electricity. Luckily for some, energy producers buy natural gas in bulk years ahead of time, so you might not see those increases in your energy bills, at least not until maybe next year. Now many areas got a big break from the sweltering heat this week, but you may have to keep that air conditioner on well into September. The National Weather Service predicts higher than expected temperatures across most of the country over the next three months. You can see where right there. But let's go back to gas for just a minute. It's not just changes in demand that move prices for gas anymore. Some refineries here in the U.S. are having a variety of problems. Plus we're in hurricane season; oil prices are volatile. The conflicts in Syria and Egypt, those cause worries about the supply chain. And big banks -- big banks may also be contributing. A Senate Banking Committee hearing this week discussed whether banks that own power plants, pipelines, and other physical commodities businesses pose problems for consumers.</s>SEN.  ELIZABETH WARREN, (D) MASSACHUSETTS: But I also don't think that most retirees realize that their pension or retirement savings are used to pave the way for big banks to be able to control an electric plant or an oil refinery.</s>ROMANS: Tom Kloza is an expert on everything from the well head to the gas tank. He's also chief oil analyst at Gas Buddy. Nice to see you, Tom. So big banks, tensions in the Middle East, demand, cash-strapped Americans, refinery problems, is there a simple way to explain why gas prices are rising when we are flush with oil and gas in this country?</s>TOM KLOZA, CHIEF OIL ANALYST, GAS BUDDY: Well, we're part of the world, and we do have the privilege numbers in terms of cheaper crude than the rest of the world, but there are a billion people elsewhere in developing countries that are moving into the middle class, let's say, in this generation. So we're going to see some settlements of world oil prices. But relative to the rest of the world, we've got better prices for crude, we've got much cheaper prices for natural gas and we've got a little bit of a privileged continent atmosphere. People don't notice it because they're paying about what they paid in the last three years for gasoline, but you look a generation ago, and it was, oh, a dollar or a $1.50 a gallon lower.</s>ROMANS: So it could be worse? Without all these new supplies of oil and energy, it could -- it would be worse?</s>KLOZA: It could be worse. And I think that we need to remove out of the equation that we're not going to go to $5 and $6 or anything like that.</s>ROMANS: We're not?</s>KLOZA: No, we're not. Only if we had some sort of major cataclysmic event like a major Mid-Eastern (sic) war. We've got plenty of refining. We've got plenty of domestic crude. We're producing more crude oil right now than we have since December of 1990, and we're going to go into the '80s in terms of matching production (inaudible).</s>ROMANS: Oh, yet we complain. We might be an entitled continent, but we complain. I mean, look, there was a commenter on a recent Gas Buddy blog that said that gas goes up like a rocket and down like a feather. Do you think prices have peaked for this move?</s>KLOZA: I think they've peaked for this year. We got to $3.78 in February, which was sort of in anticipation of what might happen. They peaked unless we get events. And by events, I mean if we get a hurricane in the Gulf of Mexico, you can almost take whatever the category of the hurricane is and move it in some sort of exponential like cubit, and that will be how much gas will go up. But without that and without Egyptian violence breaking out into the Suez Canal and elsewhere, I think we're pretty close to a top and I think we'll see much lower prices in the last 100 days of the year.</s>ROMANS: Yes. Well, I'm telling you, I'm so glad to turn my AC off. I mean, if it isn't put in the gas tank, it's going to paying my electric bill this summer. Thanks.</s>KLOZA: Could be.</s>ROMANS: Nice to see you. Here are the other stories that matter to your money this week. It's not all just about the gas tank. Give me 60 seconds on the clock. It's "Money Time".</s>ROMANS (voice-over): Good news for Apple. It sold 31.2 million iPhones last quarter. No one saw that coming. The bad news, profits sank and investors are still waiting for Apple's next big thing. A new study finds parents are forking over less cash for their kids' college. Instead students rely more on scholarships and they're bunking up with Mom and Dad. One kid who doesn't need a college fund, Kate and William's royal baby boy. Estimates for the cost of raising the prince at a million bucks, and that's with a rent-free palace. If the royal baby wants a Taco Bell kids' meal up, he's out of luck. That's because Taco Bell won't be selling meals with toys anymore. Taco Bell is the first national chain to dump the kiddie menu. You might also say goodbye to mail at your door. The cash-strapped Post Office pushing to cluster boxes instead of door-to-door delivery. You can Google this next story. Google accounts for 25 percent of all web traffic in North America. That's bigger than Facebook, Twitter and Netflix combined. And Netflix could use some more of that traffic. Bringing back "Arrested Development" helped bring in lots of new viewers, but not enough to keep investors happy.</s>ROMANS: Facebook finally delivers. The company had its best day ever on Thursday, rallying 30 percent after making big inroads in mobile advertising. The stock is still 10 percent below the IPO price of 38 bucks, but several Wall Street firms are now raising their target price above that threshold. Then there's the housing market. Home prices are up more than 12 percent from a year ago. This is according to S&P; Case Shiller. This market is no old bull; it is a young pup. Housing website Zillow predicts home prices will rise another 5 percent over the next year nationwide and double digits in some markets. So where should you put your money now? Before we ask Wall Street, let's hear from Main Street.</s>UNIDENTIFIED MALE: If I had some cash to burn, I would most likely buy real estate.</s>UNIDENTIFIED FEMALE: I would probably buy stocks.</s>UNIDENTIFIED FEMALE: I think the stock market on the whole has always done better.</s>UNIDENTIFIED MALE: I feel like the housing market is going to eventually go up.</s>UNIDENTIFIED MALE: But if I'm looking to make a real return on my investment, I'm going to buy some stock.</s>UNIDENTIFIED FEMALE: If it's not under my mattress, it would probably be in real estate.</s>ROMANS: If it's not under my mattress. There is always somebody putting it in the mattress. Let's ask the experts. Keith McCullough is CEO of Hedgeye Risk Management; Michelle Meyer is the senior U.S. economist at Bank of America. Nice to see you guys. Wow, Keith, if we talk hot market, look at Facebook. And now the targets are getting bumped up. Is this "fool me once" with all the hype here or are you buying in?</s>KEITH MCCULLOUGH, CEO, HEDGEYE RISK MANAGEMENT: Yes, I definitely wouldn't buy Facebook today. What I'd actually do is if you own Facebook, I'd take it, I'd sell it and I'd buy a house with it, Christine.</s>ROMANS: You would!</s>MCCULLOUGH: Yes, I think that's the right call. People feel -- and should feel -- comfortable in housing in particular. Your supply is tight. Demand from a mortgage -- think about your mortgage payment as a percentage of your income. It's at a historical low, so that's affordable. And prices, as you pointed out multiple times, are rising, which is a great time to buy a house.</s>ROMANS: Michelle, lots of debt on housing this week. Existing home sales, Michelle, slipped in June, but new home sales are at a five- year high. You look at some of this housing data, do you agree that, you know, with mortgage rates falling for the second straight week, that the read on the housing market is still quite bullish?</s>MICHELLE MEYER, SENIOR U.S. ECONOMIST, BANK OF AMERICA: I think it is. And I think the fundamentals are very supportive of home prices continuing to rise. We have very low inventory; we have a lot of pent-up demand coming from household formation and also coming from people that were sitting on the sidelines, waiting to feel more comfortable about the idea that housing is once again an appreciating asset. So I think we are seeing a continued improvement housing demand. It could be volatile; it always is volatile. The data is very noisy, so we have to be careful of reading too much into one month.</s>ROMANS: (Inaudible) it's a gain for the 1 percent, this real estate game at the moment, because when you look at first-time home buyers, they're 30 percent of home sales, and first-time home buyers tell their realtors -- the NRA reporting that they can't find the house they want in their price point; they can't find something they can afford. That's probably because of an inventory issue. And also they're still having trouble getting mortgages. You look at some of these other markets, 57 percent of the purchases in like Florida are cash purchases; 80 percent of purchases in the last year in Vermont are cash purchases. Doesn't seem like it's a gain for the masses. It still seems like the people who have money are making money in real estate.</s>MEYER: Well, it still in many ways is a distorted market. We came off of the biggest housing recession since the Great Depression. We've had a lot of distressed inventory and we've had extraordinarily low production, extraordinarily low construction. So I think, yes, in terms of clearing out the distressed inventory, in terms of moving the existing property, it's been driven by that higher end individual. Once we start to see new construction pick up, which is more focused towards that entry-level homebuyer, then I think we begin to see the resemblance of a more normal housing market. We're not in a normal market. This is the beginning of a turn which ultimately will be towards a more stable market.</s>ROMANS: OK. Keith, you said earlier take that Facebook stock and buy a house with it. If you ask the question stocks or real estate, is the answer both?</s>MCCULLOUGH: Yes, I think it's both. But again, it's all about the duration of your holding, so I think you had a lot of normal people give you that explicit answer. And I think on stocks you got to keep buying pullbacks, because what the market is really doing, and Facebook is a shining example of this, is that the market is saying, hey, look, we like growth. Even though the rest of the world is trying to scare the hell out of you every day, fear is for sale, bonds are for sale, so you want to sell those, and you want to buy stocks on pullbacks, and then you want to take your gains and you want to buy longer duration assets like a home. Again, I agree with a lot of what Michelle had to say on that. Affordability and a lot of metrics is right where you want it to be. Now you just need that type of supply to come online.</s>ROMANS: All right. We keep hearing, if you have a house, buy another. (Inaudible) big hedge fund guy last week, if you have one house, buy another. That's the best place for anybody to make money these days. Michelle, thank you so much. Keith, nice to see both of you. Coming up, sex, lies and money. From Anthony Weiner to Wall Street, these days it's hard to find anyone to trust.