LOOK OUT BELOW

There was much relief on Friday with the announcement of the government's plans. I think reality is going to set in tomorrow and we will see things head back down. The economy is still going to contract. Even with the Fed Funds rate at 2%, LIBOR is up and going to hit many domestic businesses that have their notes tied to that variable rate. Money is cheap, but nobody (other than the government) wants make loans. Many are calling saying the current economic crisis is going to be the worst since The Great Depression, and I think it all hinges on liquidity. If we can give the credit markets successful bypass surgery, things won't be that bad--but if we see continued freezing in these markets---we are in a huge mess.

I don't want to personally go out and buy gold right now and I will tell you why. Fear is high and I believe that gold is the fear play, not the inflation hedge. I think there is a fear premium right now.

At the time of this writing 9:30 pm eastern time, the futures are under pressure and gold is down about $8.00 in the overseas markets. I don't expect these markets to act rational tomorrow. Our reationary Securities and Exchange Commission has halted short selling in many stocks and that is going to hurt liquidity more than people believe if they continue it for very long. Many of you know that I like pairs trades. I favor a long WRI and short LTM play. Now make no mistake about it, LTM has been heavily shorted and there is a risk of a short squeeze. At any rate, over the long haul WRI should outperform LTM in my estimation.

My posture right at the moment is to be patient and try to position myself to take advantage of inefficiencies that will be created around the recent PANIC. I am not in the camp that thinks life as we know it is on the verge of being over. I think we have more bank failures, but we lost alot of financial institutions during the 1980s and lived to tell about it. The governement is creating inflation and is on touch moral ground---I am sick of seeing the bailouts personally. But I do not think it is going to totally wipe out our economy. As a matter of fact, budget defecits do not bother me nearly as much as they do many. We are going to have to prepare to fight inflation, but it can be done. We will see some recessionary times, but that is OK. Recessions are a part of the normal economic cycle. We need to experience recessions every few years--they keep things healthy. Inefficient companies need to fail and inefficient consumers need to go bankrupt. I have a lot of cash, but am not converting it all to gold. I am not selling the farm and betting on our economy going down.

I will finish by saying that the kind of reform we need is to destroy the 2 party system in our current political system. We need to DEMAND that these political parties NOT RECEIVE TAXPAYER MONEY. Most people have to affiliate with one of the parties in order to raise enough money to run an effective campaign. We need to have a system where ordinary citizens can run for office and make a difference without having to sell out to a party to get elected. Corruption destroys and we need to return the power to the people----NOT THE PARTIES.