4 Reasons Social Security Is In Trouble - Will You Be, Too?

etra images/Getty Images On Monday, the Social Security Trustees published its annual Trustees Report on the health of the Social Security system. The bottom line has changed very little since last year's report, and the trustees still expect the Trust Funds to empty in 2033. Once the Trust Funds empty, the program will only be able to pay around 77 percent of its scheduled benefits. Still, while the trustees maintain their overall projection for the program, its underlying financials continue to crumble. For one thing, the program's 75-year actuarial deficit increased to 2.88 percent of payroll, up from 2.72 percent last year. For another, the retirement-related Trust Fund -- when considered on its own -- is on the path toward emptying a year sooner than last year's projections. The table below shows the details:

Social Security Trust Fund 2014 Trustees Report 2013 Trustees Report

Retirement Trust Fund	Empties in 2034	Empties in 2035
Disability Trust Fund	Empties in 2016	Empties in 2016
Combined Trust Funds	Empties in 2033	Empties in 2033

What's Driving This Decline? There are at least four key drivers behind Social Security's weakening condition: 1: Falling labor force participation rate. This metric measures the percentage of the U.S. population age 16 and older either working or actively looking for work. Unfortunately, as the chart below from the Bureau of Labor Statistics shows, that measure has dropped substantially this century. Source: Bureau of Labor Statistics Social Security is primarily financed by payroll taxes. The fewer people working (or even looking for work), the smaller the potential wage base to support the program. 2: The relentless rise in the disability rate. The two charts below show the Congressional Budget Office's current and projected disability rates by age, the first for males and the second for females. The disability rates have risen relentlessly since around 1990, and the trends show no sign of stopping. Source: Congressional Budget Office Source: Congressional Budget Office This is a double whammy for Social Security. For one part, the disabled often qualify for Social Security Disability benefits. The more people who are on Social Security Disability, the bigger the strain becomes on that part of the combined Trust Fund. For the other part, people collecting Social Security Disability rarely earn much (if any) income. People who aren't earning income aren't paying into the Social Security system. 3: The aging population. Longevity is a wonderful thing (especially for those of us who aren't getting any younger). Still, the longer people live and the more people who survive into their retirement years, the higher the cost of Social Security will be. The chart below from the Congressional Budget Office shows how the population of those ages 65 and older is expected to grow -- both on its own and as a percentage of the overall U.S. population. Source: Congressional Budget Office Once you stop working in your retirement, you stop paying into Social Security, and instead, you start collecting. Additionally, the longer you live, the higher the total amount the system needs to pay to cover your benefit. 4: Low interest rates. While most of Social Security's income comes from payroll taxes, it also makes money from the interest earned on the Trust Funds. Those Trust Funds are invested in special Treasury bonds, and like any Treasury bond, they mature. In our current low-interest-rate environment, the Social Security Trust Funds are forced to buy lower-interest bonds to replace higher-interest ones that mature. The chart below shows the billions of dollars in annual interest lost since 2010 to lower interest rates: Author's calculations based on data from the Social Security Administration. Social Security is already spending more in benefits than it takes in as payroll tax revenue, and interest is the program's next largest source of income. The longer low interest rates go on, the larger the negative impact those low rates have on the Social Security Trust Fund's solvency. What Can You Do? For those four key reasons, Social Security is, and will continue to be, in trouble. With the Trust Funds expected to empty in 2033, you need to prepare. Your most prudent course is to invest as though you'll need to cover the gap between your expected Social Security benefit and what the program anticipates being able to pay. The sooner you get started, the easier and cheaper it is to get there. With around 19 years before the Trust Funds are expected to empty, you've still got time to build a reasonable plan, but the longer you wait, the tougher it gets. So get moving now. More from Chuck Saletta
•How You Can Retire as a Middle-Class Millionaire •Why a $1 Million Goal for Retirement Still Matters •Are You Planning to Work Until 67? And Will You Be Able To?

The Two Faces of Coal

Over the past two and a half decades, a real dichotomy has emerged in the global coal markets. In the Western world, coal consumption is on the decline. If you live in the West and read news articles about coal in the West, you might think that coal consumption is on the decline globally. But you would be very wrong.

In the US, coal consumption has been flat to declining for the past 20 years. Just since 2007, US coal consumption has fallen by more than 20%. This is the primary reason the US leads all countries in reducing carbon dioxide emissions over that same time period. Last year, the US still accounted for 11.9% of the global demand of coal, but the 455.7 million metric tons of oil equivalent (Mtoe) that the US consumed was roughly the amount we consumed in 1987.

The story is the same in the European Union (EU). Since 2007, coal consumption in the EU has fallen by 12%. While the consumption decline since 2007 is not as dramatic as that in the US, the decline in EU coal consumption since the late 1980s has been greater. In 1989, US and EU coal consumption were almost identical (480.5 Mtoe for the US versus 487.6 Mtoe for the EU), but then consumption in the EU fell sharply during the 1990s. Today the EU share of the world's coal consumption is 7.5%.

The story of declining coal consumption in recent years holds true for most of the developed world. Canada, Australia, and New Zealand have all seen their coal consumption decline since 2008. Japan's coal consumption was on the decline until the 2010 Fukushima nuclear power plant accident, but has been increasing since as Japan tries to make up for the loss of nuclear power. Germany is a notable exception in the EU. It has seen coal consumption rise in three of the past four years, but there too the general trend for the past 40 years has been sharply lower coal consumption.

Consider that in 1980, the US, the EU, and Asia Pacific each consumed! some 400 to 500 Mtoe of coal. EU coal consumption never went much beyond that level before beginning to decline to the current level of 285.4 Mtoe. US coal consumption rose a little bit, but topped out at 574.2 Mtoe in 2005.

But in the developing world, coal consumption trends have been very different. In fact, coal's gains in the developing world are hard to put into perspective. This graphic should help:

In 1980 the combined coal consumption of the US and the EU was 866 Mtoe. Today, the combined coal consumption of the two is 741 Mtoe. But the increase in Asia Pacific's coal consumption since 1980 is 2196 Mtoe — nearly triple today's combined coal consumption of the US and EU.

China is the world's top consumer of coal, and was responsible for the largest share of Asia Pacific's gains since 1980. Of the 2196 Mtoe increase in coal consumption, China was responsible for 1620 Mtoe — 73.8% of the total gain.  This represents a more than six-fold increase in China's coal consumption since 1980, which is of course partially explained by the outsourcing of manufacturing from developed countries.

No other country comes close to China's coal consumption. In 2013, China consumed 1925 Mtoe, 50.3% of the global total. The US was a distant second at 456 Mtoe (11.9% of the global total), followed by India at 324 Mtoe (8.5%), Japan at 129 Mtoe (3.4%), and Russia at 93.5 Mtoe (2.4%).

China also produces the most coal. The 1840 Mtoe mined there in 2013 was 47.4% of the world's total, but not enough to satisfy China's coal demand. As with the consumption figures, the US was also a distant second in production at 500.5 Mtoe, which was more than the US consumed and 12.9% of global consumption. US coal exports are on the rise as a result. Following the US in coal p! roduction! were Australia at 269 Mtoe, Indonesia at 259 Mtoe, and India at 229 Mtoe.

Australia and Indonesia both produce far more coal than they consume, and as a result they are major exporters to Asia. In fact Australia is the world's top coal exporter, with nearly 90 percent of its exports destined for Japan, China or South Korea. US coal producers would love to expand into this market but are at a geographical disadvantage. Further, there aren't many options for US producers wishing to export coal from the west coast. As a result, most US coal exports are destined for Europe.

Nevertheless, the US has 26.6% of global proved coal reserves — the most of any country and enough to produce at its 2013 rate for 266 years. At current market prices for coal, these reserves would be valued at some $15 trillion, so there will be tremendous incentive to mine this coal.

Following the US in coal reserves are Russia with 17.6% of global reserves, China with 12.8%, Australia with 8.6%, and India with 6.8% of global reserves. Each of these countries has enough proved reserves to produce coal for at least 100 years at 2013 rates except for China, which has only enough reserves for 31 years of production at its 2013 consumption rate. Russia, on the other hand, has enough proved coal reserves to produce at its 2013 rate for over 450 years.

Conclusions

The global coal markets are the story of skyrocketing consumption in the Asia Pacific region that far more than offsets the consumption declines in the West. The US has the world's largest coal reserves, and because the US Environmental Protection Agency is attempting to phase coal out in the US, coal producers would like to grow their coal exports. However, these producers are constrained by geography and the availability of west coast coal export terminals in tapping into the growing Asia Pacific market.

The coal sector is one that I have not generally favored for several years. There are some opportunities, but pitfalls abound. Mo! re coal p! roducers are likely to end up as the James River Coal Company (OTCMKTS: JRCCQ), which was forced to declare bankruptcy and is planning to auction off its assets as a result of falling coal demand. But even in sectors with such a bleak outlook, sometimes a true bargain may appear. When it does, we will bring that to your attention in The Energy Strategist.  

(Follow Robert Rapier on Twitter, LinkedIn, or Facebook.)

Axel Merk: Time to Take ‘Chips Off the Table’

Inflated asset prices, investor complacency and brewing crisis that could trip up the current happy equilibrium are the backdrop for Axel Merk’s warning that it is time for investors to start “taking chips off the table.”

But the key difficulty for the Merk Investments founder and portfolio manager in his latest investment analysis is where to hide in an environment in which “instability may be the new normal.”

To answer that question, Merk first locates tracks the market’s current state as one of complacency — which is the third of three states in a market crisis.

Typically, he says, equity markets sell off in a crisis; as that crisis evolves, markets tend to differentiate: For example, when Cyprus blew up, Spanish bonds were undisturbed. In the third and current stage of a crisis, risk seems manageable.

“When a Portuguese company didn’t pay its loans on time, the markets barely blinked,” Merk writes.

It is at this stage that pundits typically advise not to sell but rather to buy the dips.

And this approach is vindicated by central bank easy-money policies that have the effect of compressing risk premiums.

European Central Bank chief “Mario Draghi has promised to do ‘whatever it takes.’ So why shouldn’t investors chase yields in the weaker Eurozone countries?” Merk asks.

The currency portfolio manager similarly critiques Fed chair Janet Yellen, whom he assesses as having “all but promised … to be late in raising rates.” What’s more, he thinks any nominal rate increases will be meaningless, because of inflation, such that he expects real rates to remain the same.

The trouble lurking in this low rate, high complacency environment is the danger that risk premia will suddenly and unexpectedly rise.

And while the source of this shift could be as subtle as a change of perception (“the glass is suddenly half empty”) or a result of the Fed seeking to engineer an exit, Merk devotes much of his analysis to growing social and geopolitical disorder.

In the social sphere, central bank easy-money policies are destroying society’s social fabric because asset holders are benefiting disproportionately, thus enlarging the wealth gap.

“I would argue policies of the Fed have a far greater impact on wealth distribution than the policies of Republicans or Democrats,” writes Merk. “Those that know how to deal with easy money, such as hedge funds, can do great in this environment; however, those that don’t know how to deal with debt easily fall through the cracks, unable to recover.”

The result is a deep erosion in purchasing power that fuels populist movements such as the Tea Party and Occupy Wall Street; Japanese Prime Minister Shinzo Abe’s populist policies; uprisings in the Middle East; and the ascendency of populist parties in Europe of late.

In this light, Ukraine’s essential problem is its inability to balance its books, thus turning initially to Russia and now to the European Union for subsidies.

Noting that World War II was preceded by the Great Depression, Merk says that “the aftermath of a credit bust is a fertile environment for the sort of dynamics that can lead to armed conflict. Russia has an interest in an unstable Ukraine; Japan might ramp up military spending to boost domestic growth, to name but two sources of instability.”

While not predicting World War III, Merk continues that “the U.S., a superpower no longer able to finance all of its commitments, is not exactly a source of stability, either: the biggest threat to U.S. national security may not be China or Russia, it’s the national debt.”

Merk is pessimistic about the possibility of dealing with the debt through entitlement reform in an environment of rising populism, for which reason he is convinced that real rates will have to remain low lest U.S. debt servicing costs rise by $1 trillion or more a year with a rise in rates.

So with asset prices at or near record levels and volatility at record lows, combined with rising world and domestic instability, investors should try to steer their portfolios away from risk.

Merk thinks bonds will be among the worst performers in the coming decade, and besides, are too risky to short because of the requirement to pay interest; he does not see the dollar as a safe haven with real interest rates in negative territory; and buying equities now means coming “late to the party.”

Investing in gold makes sense, he says, “as low to negative real interest rates may make the shiny metal that pays no interest (but cannot be easily ‘printed’) a formidable asset.”

Investors might also “diversify to baskets of currerncies” and “possibly be tactical in an effort to stay a step ahead as currency wars may be raging.” 

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Related on ThinkAdvisor:

Sony's PS4 Speeds Ahead as Microsoft's XBox Stumbles

Johannes Eisele/AFP/Getty Images The top dog in this generation of video game consoles continues to pad its lead. Sony (SNE) revealed last week that it has sold 10 million PlayStation 4 systems since hitting the market nine months ago. Microsoft (MSFT) has yet to respond, but the latest data out of industry tracker NPD shows that the PS4 was once again the country's best selling system in July. The last time we got comparable data it wasn't even close. Ahead of June's E3 gamer conference, Sony announced that it had sold 7 million PS4s. Microsoft countered by revealing that it had sold 5 million Xbox One consoles to retailers. This wasn't a difference of 2 million boxes. Sony's figure was for devices that had made it all the way into the hands of gamers, while Microsoft's tally included all of the systems collecting dust on store shelves. Technology blog Extreme Tech estimates that Microsoft has sold just half as many of the current generation consoles to consumers as Sony at this point. Add it up, and it's not too shabby. Few figured that the Xbox One and PS4 -- released just a week apart last November -- would have sold a combined 15 million right now. And 5 million XBox Ones is nothing to sneeze at. This doesn't mean that Microsoft can rest easy. It's in a bind. History hasn't been kind to former market leaders that fail to keep up in future generations. If you need proof, just think about what Atari, 3DO and Sega are doing on the console front these days. Gamers are noticing the shift in dominance. Investors will have to follow suit. There Are No Cheat Codes "History has shown us that the first company to reach 10 million in console sales wins the generation battle," is a quote that may come to haunt Microsoft. Those words were spoekn in 2008 by then-Xbox head Don Mattrick when the Xbox 360 beat the PS4 to that meaty milestone. It should be said that the Xbox 360 came out a year before the PS4. It also didn't help that the PS3 hit the market as the priciest of the three systems at the time, setting gamers back as much as $599 in its 2006 debut. Sony learned its lesson. It made sure that it hit the market at a lower price than Microsoft this round. When Microsoft announced last year that it would hit the market at $499, Sony revealed that it would price its device at $399. When Microsoft infuriated gamers by suggesting that it would incorporate some software protective features, Sony cashed in by poking fun of the measures that Microsoft eventually abandoned. The same Sony that gamers hated two years ago when its online gaming network was hacked has suddenly become the rock star in the eyes and controller-clutching grips of diehard gamers. Investors thought that this would be a close race, but folks who play the games and follow the industry knew that PS4 was going to have the early lead in this generation. Microsoft's losing, and it doesn't have a lot of time to catch up. Game On Microsoft has gone from trying to please software developers last summer to trying to woo players this summer. It rolled out a new Xbox One that matches the PS4 at its $399 price point, forgoing the Kinect motion-based camera controller. This upset developers that were making games under the assumption that Kinect would be available to all players, but the gamble seemed to initially pay off when Microsoft announced that Xbox One sales tripled after the pricing move. However, as long as Sony has the lead -- and NPD's data shows that PS4's lead is only widening this summer -- this could lead to bigger headaches for Microsoft. A console needs developers, and game makers aren't going to spend as much time working on titles to serve an estimated 5 million Xbox One players when that same time and effort can be used to target Sony's much larger audience of PS4 owners. Microsoft has several games that are exclusive to the Xbox One, but it's also not a surprise to see that last month's best-selling game -- "The Last of Us Remastered" -- is a PlayStation exclusive. Sony is making sure that it doesn't take anything for granted. At E3 two months ago, it introduced a cloud-based game streaming service called PlayStation Now and entered the set-top media player market with PlayStation TV. Microsoft, on the other hand, continues to reel backwards. Last year's dreams of making the Xbox One the centerpiece of today's home theater haven't played out, and now it's closing the entertainment studio that was going to deliver original video streaming content. Microsoft is back to trying to market its Xbox One as a machine for gamers, but with 10 million early adopters already choosing its longtime rival, it's not going to be easy to stand out. More from Rick Aristotle Munarriz
•Week's Winners and Losers: McCafe Brews, Hertz Stews •While Whole Foods Wilts, Other Organic Food Sellers Bloom •Buy a Designer Handbag Now (but Sell the Designer Bag Maker)

MSFT Stock Up on Job Cut News, More Gains Ahead

Microsoft Corp. (Nasdaq: MSFT) Chief Executive Officer Satya Nadella announced today that the company will be cutting 18,000 jobs, a move that will eliminate 14% of the company's workforce. Following the news, Microsoft stock was up 3% in morning trading.

In an email to employees, Nadella noted that the first 13,000 jobs will be cut within the next six months. He also said that 12,500 of the cuts will come from its Nokia division, which MSFT officially acquired in April. More details about the cuts will be announced when Microsoft makes its public earnings call Tuesday.

"It's important to note that while we are eliminating roles in some areas, we are adding roles in certain other strategic areas," Nadella said.

In the email, it's clear that the layoffs are meant to streamline Microsoft's business. Nadella also contends that the job cuts will help Microsoft modernize its engineering processes.

"First, we will simplify the way we work to drive greater accountability, become more agile, and move faster," Nadella said.

"[W]e plan to have fewer layers of management, both top down and sideways, to accelerate the flow of information and decision making. This includes flattening organizations and increasing the span of control of people managers. In addition, our business processes and support models will be more lean and efficient with greater trust between teams. The overall result of these changes will be more productive, impactful teams across Microsoft."

Nadella previously hinted that Microsoft would be making organizational changes last week in an employee memo.

Since then, Microsoft stock has climbed 9% in just five trading sessions. Yesterday, MSFT stock closed at $44.08, its highest value since 2000. In 2014, Microsoft stock is up more than 21%. It's gained more than 27% in the last 12 months.

Today's job cut announcement sent shares to 52-week highs, but now the big question is if MSFT stock can maintain its momentum.

Here's why things look good for the tech giant...

Where Microsoft Stock Is Headed

According to Barron's, MSFT stock has seen an influx of September $44 calls from options traders in the last 10 days, meaning investors are bullish on Microsoft stock long-term.

Typically, calls that expire close to an important date are purchased by options traders looking to capitalize on a specific event. The fact that many investors are buying September calls, even when Microsoft reports earnings Tuesday, indicates that investors are bullish on MSFT well past its earnings date.

Currently, there are approximately 55,000 outstanding contracts on MSFT stock.

"If the stock were to hit $50, for example, the calls now trading around 64 cents would be worth $6," Barron's Steven M. Sears said yesterday. "Most of the calls traded at the asking price, which indicates they were probably bought by institutional investors."

Insider or institutional buying is another bullish sign for a stock, because it indicates optimism among the company's inner circle.

"There's really only one good reason for insiders to be buying shares of their company - they believe better times are ahead and that the stock is destined to rally," Money Morning's Defense and Tech Specialist Michael A. Robinson said. "In fact, spotting insider buying is a good way to consistently beat the market. Basically, this is about as bullish an indicator of a company's future as you can find."

Robinson said after the last MSFT earnings report in April that the company - under Nadella's leadership - was making progress in multiple areas now.

"I'm feeling a lot more optimistic about [Nadella] as a leader... he's come out like gangbusters, and has great reviews from analysts across Wall Street," Robinson said. "Microsoft needs to continue driving down costs and keeping its margins up."

And slimming its workforce by 14% today was a major step toward driving down costs.

"At this point, it's all about execution," said Robinson. "They need to do everything well."

Today's announcement created a nice bump for MSFT shares, and if Tuesday's earnings report show strong forward guidance figures, another bump is likely. But that may just be the beginning in a new era for MSFT stock.

"[T]he interest in September expiration suggests investors are taking a longer view of Microsoft, and positioning for the new CEO to continue to announce investor-friendly news..." Sears said.

Share this story on Twitter @moneymorning and @KyleAndersonMM using #Microsoft.

If you follow the headlines, you'd think the last place to invest your hard-earned money is in healthcare. But that's not the case. Here's why you shouldn't wait to invest in this industry boom...

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Why DC Just Moved 'Batman v. Superman' Away From 'Captain America 3'

Batman v. Superman is no longer opening the same weekend as Captain America 3, Photo credit: Time Warner, Disney

Rejoice, superhero fans! Time Warner (NYSE: TWX  ) just confirmed you'll be able to see Batman v. Superman: Dawn of Justice over a month earlier than originally planned. Specifically, Warner Bros. moved Batman v. Superman's scheduled release date from May 6, 2016, to March 25, 2016.

But there's another reason the decision is important: This means Batman v. Superman is no longer slated to be released the same weekend as Disney (NYSE: DIS  ) Marvel's Captain America 3. And that's a great thing for both Time Warner and Disney, as their respective films surely would have experienced at least some level of sales cannibalization by forcing movie-goers to choose between the two blockbusters in their crucial first weeks.

Not that it should come as a huge surprise. Back in May, I wrote:

I don't think Disney's taking the bigger risk here here. Someone's going to flinch, and nobody really believes they're both going to come out the same weekend. In this case, I think Time Warner would be the one who should flinch and move their date -- if even a couple weeks earlier just to separate the two.

Here's why DC backed down
But why, exactly, did Time Warner "flinch" in this case? First and foremost, it's a matter of brand momentum.

Remember, every film since Marvel's The Avengers has ridden a wave of momentum in Disney's Marvel cinematic universe to exceptional results, recently including the stellar April performance of Captain America: The Winter Soldier earlier this year. Worse yet for DC, Marvel is planning to release Avengers: Age of Ultron on May 1, 2015, and there's little doubt the multi-character tentpole will only propel future Marvel films like Captain America 3 all that much higher.

Marvel's Avengers: Age of Ultron will create significant momentum for Captain America 3. Credit: Marvel.com

By contrast, and though comic book fans are genuinely excited for the prospects of Batman v. Superman to eventually lead to a Justice League film, the broader movie-going public simply doesn't share the same level of enthusiasm yet for Time Warner's DC cinematic universe.

There's also the matter of principle. To Disney's credit, it did announce Cap 3's May 6 launch first, only to have Time Warner and DC come marching in later to issue Batman v. Superman's shockingly direct challenge. At the same time, it was hard to blame Time Warner and DC for trying to grab the same weekend in May, as the date represents the start of the lucrative summer box office season.

In addition, some historical calendar envy was likely present -- that weekend had already been occupied by Marvel blockbusters in each of the previous three years, including Thor on May 6, 2011, Marvel's The Avengers on May 4, 2012, and Iron Man 3 on May 3, 2013.

My (comically) Foolish takeaway
So where does that leave Time Warner investors now? In short, I think the new March date is great choice for DC.

After all, during the same weekend in 2012, The Hunger Games set a new spring record by tallying an incredible $152.5 million in its own weekend debut. Then this year, Marvel mixed things up with the April 4 release of Captain America: The Winter Soldier, which became the highest-grossing April film of all time following its own record $95 million weekend launch. If one thing seems sure, it's that the The Hunger Games and Cap 2 proved the right cinematic property can bring movie-goers out no matter what its timing.

In the end, I doubt Time Warner will ever completely elaborate on its reasons for moving Batman v. Superman -- especially if those reasons include admitting Marvel's brand is simply more powerful in the cinema right now. If one thing seems sure, however, it's that Batman v. Superman will be much better off with its new date.

Your cable company is scared, but you can get rich
This battle doesn't end with the big screen. You know cable's going away. Do you know how to profit when that happens? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple. 

 

Stocks to Watch: Walgreen, Time Warner, Sprint

Video: Wed., Aug 6: Time Warner Among Stocks to Watch

Among the companies with shares expected to actively trade in Wednesday’s session are Walgreen Co.(WAG), Time Warner Inc.(TWX) and Sprint Corp.(S)

Walgreen said it would buy the remaining 55% of Alliance Boots GmbH() (AB.YY) that it doesn’t already own, while the drugstore chain confirmed it would keep its headquarters in the U.S. Shares slumped 14.2% to $59.30 in premarket trading.

Time Warner said its second-quarter earnings rose 10% as its revenue grew behind a surge in results at HBO and Turner. On Tuesday, 21st Century Fox Inc.(FOXA) abandoned its takeover pursuit of Time Warner, citing Time Warner’s unwillingness to “engage with us” and a sharp drop in Fox’s stock price. Time Warner’s shares sank 13.1% to $74 premarket, while Fox shares rose 5.4% to $33.

Sprint Corp. on Tuesday decided to end its pursuit of T-Mobile US Inc.(TMUS) in the face of stiff opposition from regulators and replace Chief Executive Dan Hesse with Marcelo Claure. Meanwhile, Iliad S.A.(ILD.FR) said it plans to push ahead with its offer for T-Mobile. Sprint shares dropped 17% to $6.04 premarket. T-Mobile shares fell 8.6% to $31.

Viacom Inc.(VIAB) said its fiscal third-quarter earnings fell 5.1% as a revenue decline in the company’s filmed entertainment business dragged down the top line, while its media networks unit logged tepid growth. Shares were inactive premarket.

Apollo Global Management LLC's(APO) second-quarter profit widely missed Wall Street expectations, as the private-equity firm hauled in less money cashing out on deals. Shares lost 3% to $25.12 premarket.

Cytori Therapeutics Inc.(CYTX) on Tuesday said it is putting a clinical hold on enrollment in two chronic-heart-failure clinical trials, citing safety concerns. Shares sank 32.9% to $1.41 premarket.

Dish Network Corp.(DISH) swung to a second-quarter profit as the satellite-television provider reported stronger revenue and narrower pay-TV subscriber losses. Shares ticked up slightly to $62.35 premarket.

Parker Hannifin Corp.(PH) said its fiscal fourth-quarter earnings rose 11% on higher results in its diversified industrial segment as the company continued its restructure efforts.

Mondalez International Inc. said its second-quarter earnings rose 3.5% as the food maker’s lower expenses offset a slight revenue decline. The company also lowered its full-year revenue outlook.

AOL Inc.(AOL) said its second-quarter profit edged down 1%, as higher costs masked a notable increase in advertising revenue from the Internet pioneer.

Spectra Energy Corp.(SE) said its second-quarter profit fell 26%, reporting weaker-than-expected results as plant turnarounds dented revenue growth and increased costs.

Devon Energy Corp.(DVN) reported stronger second-quarter earnings, excluding items, as the company’s revenue was boosted by production growth in high-margin oil, as well as higher prices.

Crude Oil Is the New Gold Standard

Today I want to tell you a story about energy - especially crude oil.

It involves my run in with the steak bandit...

Just stay with me here...

It begins last Saturday. On a trip to the local supermarket, I saw something you just don't see every day.

You see, I always do the grocery run. It is one of several clauses that have appeared over time in my marriage contract (no doubt about it, this is one document you need to read before signing!).

As I left the store, a crowd had formed outside. There were police all around and the parking lot had been sealed shut.

It turns out a fellow had shoved some steaks down his pants and made a dash for it.

By the time all of us had stretched our necks to see what was going on, the suspect was just sitting... in a car that wouldn't start... with the doors locked... and the windows up... in 90-degree heat.

All in all, he couldn't have been having a very good day.

Maybe he was that hungry. Or maybe he forgot his wallet at home and was late for a party. I'm not sure.

Either way, he was bound for the Allegheny County Jail.

(By the way, the jail is the impressive newer-looking building by the Monongahela River in downtown Pittsburgh. You can't miss it. It looks like an upscale Holiday Inn.)

But I digress; back to the steaks.

I must admit, for a while at least, there will be a question in the back of my mind every time I go to a barbecue. Like, "Any idea where that meat has been recently?"

However, aside from a possible commentary on the plight of some people in the current economy, the episode with the "steak bandit" brought back a memory, along with a broader implication for the energy sector.

Here's the memory and how it relates to energy...

Moving to a Better Monetary Standard

More than 40 years ago, during another bout with a sputtering economy and a declining dollar, I made a remark that drew a fair amount of attention. At the time, I had my own radio talk show in Chicago.

In response to a caller's criticism of the U.S. Federal Reserve and the declining value of the dollar, I made a suggestion (somewhat tongue in cheek) that was then embellished for several days...

"Why worry about shoring up the dollar," I said, "when what we ought to do is move to a better monetary standard."

My suggestion was we use something everybody thought was valuable - steak.

Well, the "steak standard" made the rounds, got mentioned in the local press, and landed me some interviews. There was a more serious point behind all the fun, of course, but it was lost in translation.

My point was this: Throughout history, money has had three primary functions. It serves as a form of exchange, it allows us to price very different articles and commodities, and it provides a way to store value.

By itself, a dollar or a euro or a ruble or a yuan is literally not worth the paper it is printed on.

Of course, these days, there are other ways to complete an exchange without the use of money as such. And the Bitcoin revolution indicates we may have other pricing alternatives. That leaves us with just the value storage function of money, which often turns into a discussion about whether or not we ought to return to the gold standard.

While it has provided the convenience of a common venue of measurement for centuries, the gold standard has always been a very artificial thing. There are, after all, very few real uses for gold. For example, unlike steak, you can't eat it.

Whatever storage value gold has comes from what governments, central banks, and traders give it. There is little utility in the metal itself.

Which finally brings us back to energy and its role in the economy...

Crude Oil Is the New Gold Standard

As I have discussed several times in Oil & Energy Investor before, crude oil is replacing gold as a more accurate storage of value in the economy as a whole.

Unlike gold, the value of oil is essentially measured by what we use it for. Oil, and by extension natural gas and electricity, comprises an essential and inescapable underpinning for every economic function.

Energy generally increases in price as economies improve because demand for it increases. On the other hand, in an economic downturn, energy prices tend to suffer a contraction.

But unlike a gold standard, which represents an official value declared by fiat, energy prices actually tell us something about the economic undercurrents.

For this reason, I continue to argue that the price of crude oil futures contracts are a better gauge of value stored than gold. Meanwhile, futures contracts for both natural gas and electricity are coming to occupy similar positions.

That doesn't mean we should start printing "In drilling rigs we trust" on our currency. But it does mean that energy has become the better barometer against which to value genuine assets.

Energy also has another advantage, unlike the opinions expressed by certain Middle America talk show hosts years ago.

You can't just shove it down your pants and make a beeline to the parking lot.