Wednesday, November 12, 2008


I am absolutely sick of politicians sacrificing our future. Hank "Liar" Paulson came out today and said that we wouldn't use the 700 Billion to buy the troubled mortgages, rather we would buy credit card debt to get those markets unfrozen. When we got the bailout Hammerin Hank was telling us that we had days to unfreeze the credit markets and bring LIBOR down. Now with LIBOR well under control and the markets not responding he wants to buy CREDIT CARD DEBT. What happened to that sense of urgency? Days? Wasn't the whole idea to ultimately help the housing market? Now good ole Hank wants to give the American Consumer more access to MORE CREDIT CARD DEBT---JUST WHAT WE NEED. The American system has been the greatest in the world because we WERE TRUSTWORTHY. We have lost that precious trust. We are becoming socialist by the day and the is going to be terrible for our markets. I believe that we will test 7800 on the Dow tomorrow. If it holds, that is good---but if it does not then we are headed to 7500 and on to 7000.


So do I think any investments are worth making at this point. Yes I do and you may buy them cheaper. I still like oil, gold, and natural gas.

CONSIDER THIS----These markets are so irrational. It seems that everything that correlated in the past in no longer correlated. I have never been a conspiracy theorist, but I do have a theory on the price of oil. Looking at what we do know--we know that stimulus plans, bailouts, and dovish monetary policy all lead to inflation. The government is borrowing money like nobody's business. During one of my interviews with Mr. Peter Schiff he said that the government might have to inflate their way out of debt. Excellent point. Is the government using its power and money (with Investment Banker Paulson at the helm) to prop up the dollar? Now we know that if they prop up the dollar while simultaneously scaring the U.S. Consumer, then wouldn't they get their borrowed funds at a much cheaper rate? There is so much demand at these government auctions (because there is a flight to safety) that the interest rates that the government will wind up paying are TREMENDOUSLY LOW. Was this in the initial plan? Get the rates lower with fear and then attempt to control the inflation on the back end? Lower rates---less inflation necessary to inflate your way out of the debt. So if that is what the government is doing what is the end game and how will that impact oil prices? When the government gets through borrowing---and it might be a while since we are planning to help pay for all of the dumb labor contracts that Detroit has had for the past several decades---they will want the deflation spiral to stop and stop rapidly. That is when we will see the dollar begin to decline---AND THEN THE DEATH SPIRAL OF RAPIDLY RISING OIL PRICES BEGINS AS WELL. Remember what was happening in June of this year. Dollar down because oil up and oil up more because dollar down? That sounds silly, but it was that bad a mere 4-5 months ago. This time oil will hit $200 and even more. Natural Gas will spike as will gold. Again, I am the last on to jump on the "conspiracy" bandwagon, but let me know why you think my ideas are far fetched.

Another thought behind my conspiracy theory is the point at which we see oil demand destruction/rebound. Now we really didn't see much demand destruction until oil got over $105 per barrel. Why at $70 didn't we begin to see a rebound in demand? Is there a $35 dollar disconnect between the point where demand begins to erode and where it begins to rebound. Don't give me the unemployment answer because the U.S economy is still 93% EMPLOYED. Why the disconnect? Is it consumer confidence? If it is what happens when that begins to return? Inflation will heat up much faster than most expect. With confidence rising, I would argue that we would not see demand destruction until we hit the $110 level. BY THEN IT WILL BE TOO LATE. With oil at these levels, companies are not going to allocate every available dollar to increased production and it will take them longer to ramp up those expenditure than it did to cut them back. We need oil back over $80 so we don't see so much of the planned production coming off line.

I don't doubt that tomorrow will be an awful day for the energy complex and I think you can buy it cheaper in the coming weeks. BUT INFLATION IS COMING. YOU HEARD IT FROM THE CREW AT STOCK SHOTZ FIRST. DON'T WORRY ABOUT THIS SHORT TERM DEFLATION.



Anonymous said...

Radical thoughts. I cannot disagree though it makes sense.

Dollar.Discipline said...

He ought to have to go to prison for changing the direction of the bailout after it was passed. Since when did he obtain that authority?