Sunday, September 21, 2008

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.

9 comments:

Dollar.Discipline said...

We have not nearly seen the worst. Hang on to your hats boys, this is going to take some time to work out.

Anonymous said...

i disagree with dollar.dis

the ones that are going to get hammered are the idiots out there buying gold. those are the ones that need to look out below.

dow up---gold down

Cheese said...

hmmm I guess i'm an "idiot" then for making 15% on gold in one week and almost 30% in this last week when I bought a lot of silver. lets see, market is down 500 pts. every day yet I made 20% in one week buying gold and silver. yeah, I feel like a real idiot LOL.

I can't wait till your precious dow is at 7,500 and gold's at $2,000/oz. with $50 silver again. then maybe if you're nice i'll give you a dollar so you can buy some old english 800 err, I mean some food at the AM/PM.

Anonymous said...

dow 7500? gimme a break

when they fix this credit crisis the economy will be rolling again and your gold will be looking at $300 per oz. You can't brag about the profits until you bag em

Dollar.Discipline said...

Let me tell you something anonymous. First off, be man enough to put your ID on here. I like to know who I am having to bring up to speed.

Secondly, they, being the government (aka our tax dollars) are not anywhere NEAR fixing this crisis. It will take YEARS to be healthy again. I don't mean until the Dow swings 400 points to the red or green everyday. (That's just irrational, emotionally driven decisions.) This will cost anyone who pays taxes.

I do believe we will eventually climb out of this, but not soon.

Do you honestly believe we have seen the last big lending institution bite the dust? It's just beginning to unravel.

Dude, get your head out of the sand!

Anonymous said...

Dollar I don't have a blogger id so I have to post under anonymous. My head is out of the sand where is yours?

First you are buying into the fear mongering of the peter schiff ron paul crowd. let me ask you the following questions

1) what has happened to the overseas markets? You know the place where schiff says you should invest.

2) do you honestly believe that the United States is going to lose its status in the world?

3) do you know how far our economy could fall and still be far above the rest of the world?

4) warren buffett said he thinks there are values in the US, as evidenced by his investment in Goldman Sachs. who do you trust more schiff or buffett?

I will give you a compiment in the fact that your handle (dollar) is right on target because if you keep buying into this fear crap all your portfolio is going to be worth is a DOLLAR

you sound like the typical Obama supporter everything is terrible and we need some CHANGE

Dollar.Discipline said...

I am as far from an Obama supporter as one can possibly be. Mainly because I'm sick and tired of paying people like you to sit at home and watch The Price Is Right while I'm at work paying taxes.

Looks like you were doing that instead of being in school as well. Spell it with me C-O-M-P-L-I-M-E-N-T.

I do truly believe that the US could lose it's dominance over the world market. I think we are headed for a SERIOUS correction only to get worse as the baby boomers retire and start drawing Social Insecurity checks and start leaning heavily on Medicare. They also will not be working and paying taxes.

IN regards to the comment about how much better off we are than other countries and how far we'd have to fall to not be above them....WHAT?

You can be standing taller than a pig in a muddy mire, but you're still standing in crap. Do you feel superior and comforted knowing you're better off than the pig? Which reminds me, "Never wrestle with pigs. You'll just get muddy and they like it."

Oink!

Anonymous said...

dollar

I will get a login tonight so you can quit WHINING that I don't identify myself.

From there I will say that you are an expert and I didn't know it. But I don't see how being an expert on pigs-n-crap qualifies you to make comments about the financial markets. Of course you do only make comments on this fear mongering peter schiff lovin site.

i think you shoud run down to the bedroom superstore and buy yourself another mattress because stuffin cash in a mattress seems to be your style and at least if you stuffed cash in the mattress you wouldn't lose your shirt investing in gold

the dow is headed up and you fear mongers are going to get left behind. as soon as the governement gets the credit market fixed and they will, then you will be wishing that you had invested in the banks like me.

Dollar.Discipline said...

Who said anything about buying gold or hiding cash? I'm just saying that the government is "coming to the rescue" with tax dollars paid by, you guessed it, the people.

You will pay for it one way or another. I have not pulled any money out. I continue to invest as I have been and have not altered course ONE BIT.

I just believe we are not at the TRUE bottom yet. Like I said, when you are having 300 and 400 point swings in one day, that's people freaking and rejoicing in the same day.

There will be a day of reckoning in the markets. I have said all along it could go to 10K when the government fails to bail out the other institutions like they did some of the big boys.

That's when everyone will do the duck and cover drill. Just don't sit around and think that any government is going to take care of you.

Obama preaches that it will. And if you believe that social security and medicare won't put a thumping on the system in a few years, just stand by and see.