Just when you thought it was safe…

Last week ended on a high note—stock markets rallied to virtually unchanged on the week, after the announcement of the proposed $700 billion government bailout of the financial sector. Many were breathing a bit easier over the weekend, but then yesterday, just when you thought it was safe…well, you know the rest. I know you don’t want this to happen—nobody does! We all wish that we never got here, but instead, we are forced to swallow a $700 billion bitter pill and at the same time, deal with the reality that this is likely to be a lengthy and messy process.

Yesterday, as investors slowly recognized this fact, they also had to contend with a sinking dollar and soaring oil prices. Crude oil prices spiked more than $25 at their intraday high and finished with a gain of $16.37, or 16%, at $120.92 a barrel. (Expiration of contracts for October delivery added volatility to the market, but some thought it also could have been hedge fund liquidation.) The less-than-rosy news drove investors to the sidelines. The Dow plummeted 372.75 points, or 3.3%, to 11015.69, down 17% on the year; the Nasdaq Composite Index dropped 4.2% to end at 2178.98, down 18% on the year and the broader based S&P 500 plunged 3.8% at 1207.09, down 18% on the year. The one bright asset class was gold—the December contract jumped $44.30, or 5%, to $909, as investors sought a safe-haven.

Perhaps you thought that the bailout would prevent these kinds of days, but in fact, the plan was a bitter reminder that something this big had to happen to prevent a total seizure of the credit and financial markets. “If we have to live through more of these days, then maybe I think I speak for taxpayers across the country when I say that I would rather not shell out these big bucks,” noted one friend. In the abstract, that might be the case, but we know for certain that doing nothing could have resulted in a financial calamity, so maybe a few 3% swings isn’t the worst thing in the world. In other words, a fence at the top of a cliff is better than an ambulance at the bottom. There will be plenty of time to point fingers and beat our chests about how unfair this whole situation has been, but let’s get things stable before the ambulance arrives.

As Robert Jenkins, the chairman of Investment Management Association said last week, “The crisis arose from the combination of greed, imprudence and leverage. Greed is not new. Reckless lending is not new. Imprudent borrowing is not new. What is new and what distinguishes this credit crunch from past excesses is the unprecedented level of leverage. We will not outlaw greed and cannot legislate against stupidity. But regulators can and must address the issue of leverage.” And indeed we all hope that regulators will refocus and become proactive in the future. But for now, I know that I speak for most investors when I say that all we want is a few days where we can escape history-making headlines or game-changing deals. We just want a few moments of calm, when we can dip our toes in the water without fearing the next massive wave.

I got sssssssteam heat…

As the price of crude oil nears $100, my thoughts wander to…a Broadway musical! This could be a stretch, but in “The Pajama Game” there is a song called “Steam Heat,” with an almost-perfect hook: “I got sssssssteam heat…But I need your love to keep away the cold!” As the winter months near, Northeasterners should be reminded of this song.

According to the Department of Energy, Northeastern states use 76% of the nation's heating oil and almost of a third of households in the region use oil heat. Unfortunately, the price for heating oil has risen about 2.5 times faster than for gasoline in recent weeks because heating oil and related products, such as diesel oil, are in record demand here and overseas. As a result, Northeasterners are facing a projected increase of over 20% for heating oil—ouch!

The spiking costs are the continuation of a multi-year trend: from ’00-05, the average cost in New England for a winter's supply of heating oil was $900 a household. Last year, it hit a record $1,433 and this year it could reach over $2,200. Given that we are all paying more to fill up our cars each week, it’s time to pull out the old sweater from Jimmy Carter’s “Whip Inflation Now” (WIN) and find ways to reduce your home heating bill.

1. Opt for a price cap: The way that you pay for oil could save you money. Fuel companies usually let you buy oil as you need it, but many give you an option to “lock in” a price or elect a “price cap,” which guarantees a per-gallon price that will not go higher over winter. Because the risk of rising prices is more significant than if prices drop, the capped price is one of the best ways to control your costs.

2. Install a programmable thermostat: This can save about $150 a year in energy costs if your home temperature is set back 8 degrees in the winter for an 8-hour span during the day when no one is home, and 10 hours at night. Cost: Less than $50

3. Do system maintenance: Contact your oil company or the company that installed your furnace or boiler to go over the system, which should cost $100-$150 but could save that amount and more for years to come!

4. Conduct an energy audit: You can hire an expert to conduct an "energy audit", or you can do it yourself. Go to the US EPA’s Energy Star Home Advisor web site (www.energystar.gov/homeadvisor) for tips that could help you reduce your energy bills by up to 25%. Enter your ZIP code and the type of heating, cooling system and water heater you have, and you will receive a customized list of recommendations — from caulking doorways to adding more insulation to the attic.

5. File for an energy tax credit: Replacing an old furnace, boiler, or water heater with energy-efficient units can save you money on your taxes, too. Installing new storm windows and insulation can also help keep your house warmer. Look for products with the ENERGY STAR logo. The EPA says they’re designed to use 10-50% less energy and water than standard models. File Form 5695, Residential Energy Credits, with your 2007 Federal Income Tax Return.

And on top of these ideas, the tried and true methods prescribed in “The Pajama Game” are probably a little more fun.

“But I can't get warm without your hand to hold.The radiators hissin’ still I need your kissin’ to keep me from freezing each nite.I've got a hot water bottle, but nothing I've got'll take the place of you holdin’ me tight.”