How Much of a Pay Raise Will You Actually Get?

Officially, it's 2.7% across the board, but here's the real scoop.

I'm sure many of you will notice the slight bump in pay on January 15 -- especially the targeted NCOs that get larger pay raises each year. However, I wonder how much the 2.7% minimum across-the-board pay raise is actually a raise?

You see, prices go up. When the talking heads on CNBC blather on and on about inflation, they’re talking about the general rise in prices. Aside from the stories about when a loaf of bread cost five cents, there’s another bad side to inflation: Pay raises aren’t really raises at all if your cost of living is rising just as fast or even faster.

That's why the government tracks inflation and ties everyone’s pay to it. Over the last year, prices have increased 2.1% nationwide. That means your actual pay raise was a much smaller 0.6%. So if you were making $2,000 a month before the raise, you’ll be able to buy an extra $12 worth of stuff each month, which doesn’t make 2.7% sound like much now.

The bad news doesn’t stop there. Gasoline prices may have declined, but they’re not likely to fall anymore. And with the bills from Christmas starting to roll in come January, you probably won’t even be enjoying the pay raise until next November.

That’s why you need to begin investing today. That way, next November, whether your pay raise is 2% or 5%, you’ll be sitting pretty. You’ll be doing well even if the oil companies get greedy again and ramp up gas prices. I encourage you to take a little back for yourself now and get in position to give yourself a raise next year now.

But first, let’s take a look at why gas prices haven’t fallen below $2 for any length of time and how you can watch gas prices and laugh regardless of whether they go up or down. All it takes is a couple of hundred dollars to start.

The real reason behind $60 oil and $2 gas

To get the most out of your investment dollars, you need to look beneath the surface of the current oil situation, at the real root of high prices. China’s and India’s insatiable thirst for more oil or OPEC’s rationing is not the leading cause of high oil prices.

They do contribute, but remember, prices are set by both supply and demand. The leading cause of high oil prices is on the supply side. There are plenty of oil reserves. In fact, there’s more than enough oil in Saudi Arabia to supply the world for 20 years, a 10-year supply in the North Sea between England and Norway, and even more in Argentina, Mexico, Siberia… I could go on for days.

The problem is there aren’t enough oil rigs to pump the massive oil reserves from the ground. This problem has caused a great profit opportunity. The companies that are building oil rigs, manufacturing drilling and pumping equipment, and building the pipelines and other infrastructure needed to increase oil production are swimming in profits. And the best part is, Exxon Mobil, BP, ConocoPhillips, and the other big oil companies are taking all the heat from the media.

Companies involved in keeping the oil flowing to the oil giants so they can refine it have been making even more money than the big oil companies. Investors in these companies have been sitting pretty despite continually rising energy prices.

Hurricane Katrina gave us the proof. The supply situation is so tight that when Katrina swarmed through the Gulf of Mexico it shut down 15% of offshore oil rigs and cut off about 900,000 barrels of oil production per day (less than 5% of oil consumed in the U.S.), oil prices jumped $5 a barrel, heating oil skyrocketed 58%, and gasoline rose at least 25 cents per gallon across the country.

The companies that are increasing oil supply are making the most money. Specifically, the oil rig builders are some of the most attractive companies to invest in. According to official estimates from JP Morgan, rig demand will grow by 25% in 2006 and by an additional 12% each year over the long term.

On top of that, most of the oil rig builders are booked solid for the next couple of years and are already producing rigs at maximum capacity. Some have order backlogs that run as far ahead as 2009. At least three more years of record profits for these companies are virtually in the black.

One way to profit from this supply/demand mess is with an investment in Transocean (RIG:NYSE). Transocean is the leading oilrig owner and operator in the world. Over the past two years the stock has climbed more than 150% and even more is on the way.

Another top oil stock is Dril-Quip (DRQ:NYSE). I refer to Dril-Quip as the Sam Brannan of the oil boom. Sam Brannan was the man charged with starting the 1849 California Gold Rush and he also owned a store adjacent to Sutter’s Mill. He was the one who ran down the streets of San Francisco shouting, “Gold! Gold on the American River.” At his store, he marked up his pans from 20 cents to $15 each scoring a 99% profit margin.

Dril-Quip provides the picks and shovels to the oil industry. It makes the wellheads, hangers, manifolds, and controls that allow oil rigs to function. In the process, Dril-Quip is making a mint off the oil boom while staying off the cover of USA Today.

Finding companies like these are exactly how the BreakAway InvestorSystem can reap huge rewards and quickly double or triple your money without taking on undue risk. With the profits BreakAway Investor subscribers have already reaped, paying for gas or any other of life’s necessities will be of little concern.

Sincerely yours,

Andrew Mickey

Editor in chief, BreakAway Investor

USAF Veteran

BreakAway Investor, is based on the idea that a company, no mater how small or large, can earn a disproportionate share of its market if it has product it can use as leverage against its competitors. Breakaway Investor seeks to identify companies that are about to "break away" and become leaders in their industries or sectors, while providing double- and triple-digit gains to subscribers in a matter of months. Learn more…