I like that company’s dividends in my IRA (set up by monies from my 401(k) plan) are also tax-deferred and are 85% tax free.

I like knowing that when my retirement day arrives, I’ll already have an individual IRA set up to move rest of 401(k) monies into, with twelve stocks already chosen, owned and proven to provide reliable ever-increasing dividend income. (The companies owned all have a history of raising their dividends every year.)

I like free 1% company gives me, just for being in 401(k) plan.

I like option to borrow money from my 401(k) plan, pay a low interest rate on loan and know that interest rate I’m paying on loan goes to me (if I were paying a credit card bill of $3,000.00 at 18%, I know I have option to pay off high interest credit card loan and pay only 6% interest (to myself) on $3000.00 loan from my 401(k).

I like knowing that when I move rest of my 401(k) monies into my IRA when I retire, I’ll know about how much income I can reasonably expect in dividend income four times a month, twelve months a year (all twelve stocks have staggered dividend pay-out dates, providing cash dividends every week of year).

The companies chosen in my IRA, with their history of raising dividends every year, will provide comfortable, worry-free income which I believe investing should be all about.

My advice on 401(k) plans is to talk to an expert from firm your 401(k) monies are with and find out what options are available to you and/or what your company allows. My point was simply to inform you that you may not be restricted to just putting your money into a Mutual fund or your company’s stock. You can transfer monies from your 401(k) to an individual IRA (Tradition, Roll-Over or Roth), at no fee and build your own Mutual fund. (I have been doing this in my 401(k) plan for years while still employed with my company.) If those companies you choose in your IRA have a dividend reinvestment plan you can request to have dividends reinvested back into stock each quarter. And this would be done for you, commission-free.

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The situation is more alarming when one considers that combined population of China and India makes up over 1/3 of world’s population. The number of unemployed workers in China is greater than entire labor force of United States. The competition for relatively unskilled jobs will continue, and it promises to accelerate going forward. The average American who does not stay ahead of curve or does not keep pace of trend will find his or her job being outsourced – not to mention average wage being driven down by global competition. I, for one, believe that this continuing trend of globalization will make world a better place, as hundreds of thousands of people will finally be empowered as they climb out of absolute poverty (again, over half of world’s population currently live on less than two dollars a day) – and as prices of consumer goods are driven down still further. The average American will probably disagree, but trend of globalization and “offshoring” will not stop. The last time United States adopted economic and military isolationism we had a Great Depression and subsequently, World War II. I sincerely do not think that this was a coincidence.

The trend of general aging population and globalization will have a profound impact on all Americans. Ultimately, I think all Americans will benefit – although it may not be clear to people who are losing their jobs today. For initiated and nimble, you will not only survive but thrive in these “interesting new times.” Imagine a market for your product that is over ten times size of population in United States. China and India has historically disappointed – as citizens of those countries have historically been too poor to consume much U.S. goods and services. Globalization and offshoring will change all these. A world more equalized economically will also mean a much more secure and less conflictive world.

Now, I want to address a similar concern of all Americans – as era of cheap energy (basically cheap energy prices as experienced by Americans for last twenty years) comes to a close. While I think oil prices will decline in short-term (i.e. for next few months), I am longer-term bullish on both oil and natural gas prices (I will only discuss oil in this commentary). Consider following:

• The world supply of oil is flattening out. Readers may not know this, but United States today still produce enough oil to satisfy approximately 40% of total domestic demand. The United States also had 22.7 billion barrels of proved oil reserves as of January 1, 2004, eleventh highest in world. According to Energy Information Administration (EIA), United States produced around 7.9 million barrels per day during 2003. This is down sharply from 10.6 million barrels averaged in 1985. The peak of domestic oil supply occurred sometime during 1970s. Today, total domestic production is at 50-year lows – and still falling.
• While Saudi Arabia (the world’s top exporter and contains 25% of world’s reported reserves) has claimed that there are and will be no supply problems for next few decades, they have not been transparent with their reserves data. According to Simmons & Company International, five to seven key fields in Saudi Arabia produce 90% to 95% of its total oil output – all but two fields are extremely old – with last major find reported in 1968. The last publicized reserves data was in 1975 – when Saudi Aramco was still managed by Exxon, Mobil, Chevron and Texaco. In that report, world’s best experts determined that all key fields at that time contained 108 billion barrels of oil in recoverable reserves. If this holds true, then peak of supply in Saudi Arabia will come soon. Moreover, if report is correct, then there is really no “plan B” (unlike during 1970s when center of power shifted from Texas Railroad Commission to OPEC due to peaking of supply in United States) – crude oil prices will soar.
• The “last frontier” for production of oil (namely North Sea, Siberia, and Alaska) is now aging. Most companies are now struggling in order to even maintain their current production levels.
• World oil demand continues to grow. Oil demand in early 1990s stayed relatively flat (at around 66 to 68 million barrels per day) but over next ten years to today, world oil demand increased 14 million barrels per day. Today, total world oil demand is greater than 82 million barrels per day. The energy “experts” who in early 1990s predicted a flattening of oil demand growth and who wrote off demand growth in developing countries were dead wrong.
• No new refineries have been built in United States for past two decades, even as refineries have been closing every year during that same time period. Refining capacity from 1981 to mid 1990s also dropped drastically (this author estimates a drop of approximately 6 million barrels per day in refining capacity during that time period). Since 1994, however, an expansion in refining capacity at existing refineries has contributed to an increase in refining capacity from 15.0 million barrels per day to 16.7 million barrels per day (as of today). Despite this expansion, however, domestic refining capacity is still stretched to limit, as utilization at U.S. refineries is now averaging nearly 90% -- leaving no cushion room if something unforeseen happens.

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