Thursday, August 21, 2008


If you really want to know what is going on with Russia, they are waging war on the U.S. economy by their occupation of Georgia. The Russians know that their actions are going to cause the price of oil to rise. They aren't going to pull their troops out of Georgia tomorrow. They are going to continue to drive the price of oil up and they have a better chance tomorrow because no one wants to be short oil over the weekend with the geopolitical risk. The Russians know that they can stay put and drive the price of oil up and the dollar down. While the weaker dollar has definitely been good for exports, we must have a stronger dollar so foreign investors will feel confident enough to BUY OUR DEBT. We must have a place to finance our debt and the Russians now know that they have a chance to really hurt us economically. I still think that the safest place right now is oil and gold.

I heard a couple of the mainstream media talking heads today saying that if you just pull out the financials, earnings are great. What hocus pocus. If you have been watching our show, you have heard economist John Williams say that we have not yet felt the monetary inflation. You have also heard many of our guest talk about how the consumer is hurting. As the consumer's plight gets worse, SO ARE EARNINGS. I can't see how anyone can say that the consumer's outlook is anything but worse in comparison to last quarter. We had several retailers report after the bell today and I didn't hear one report that had a really positive outlook in the short term.

We have HUGE systemic risk right now and I don't think anyone really understands how bad it really is. Ask youself this quesion "What happens if the government has to step in and backstop Fannie or Freddie----or both?" Suppose they backstop one of them and we see another Bear Stearns---Do they let the next troubled investment bank fail or do they put taxpayer money up to finance it? At what point do we say that the government can't do anymore? Or do we find that they can't do anymore after they have put up the funds and then we can't sell government debt? I believe that it is a real possibility. I made a comment on another blog about gold being ready to turn when it was below $800 and got some hate mail over the comment.

Most of you know that I have a ton of respect for Charles Payne (who will be back on our show in the coming weeks) and I heard Charles call Aluminum Corp of China (ACH) this morning on his Fox show. I have taken a look at the stock and think that Charles in on to something here. This one has faced some headwinds with the Chinese market getting hammered as of late, but it offers some growth potential.

For those of you that heard my radio interview last week, I did promise to provide some additional information on my Chesapeake (CHK) call. CHK is a major player in the Haynesville Shale find, touted to be one of the largest national gas finds in history. If the Haynesville shale plays out like many of the experts think, CHK is going to be a HUGE WINNER. The stock had gotten to over $70 and has come down dramatically based on couple of major factors. First, the price of natural gas has come down from $13 per million cubic foot to about $8. Next, the company held a secondary offering to raise funds. They did this to finance the leases that they have been signing in the Haynesville Shale area. In my opinion, the secondary offering was a great strategy. They bride the gap between the time of leasing to the time of production with perhaps a lesser share price, but with SUBSTANTIALLY LESS DEBT than they would have had if they had financed all of the lease payments. Obviously, the shale needs to be a huge success for this strategy to pay off. From early indications it is going to be, as the first wells have had monster production. I still like CHK.

So how do you play a Friday? I am going to play energy and forget about everything else unless Russia surprises me and withdraws from Georgia during the night tonight. Our visits are growing, and we are committed to bringing you a great site with more great interviews. Tell your friends. The more visits we get, the more interviews we be able to produce!!!!!!


Dollar.Discipline said...

CHK is still a great LONG TERM position. I mean years. It will be a very lucrative hold for those who have patience.