The Week Ahead and LONG TERM INFLATION

As I noted in my last post, this week is going to be critical as to whether we rally out of our recent problem or go back and test the October lows. Everything is down right now. Oil is off about $1.00 or more (note that oil moved higher after the equity markets stopped trading on Friday). The Japanese markets and the U.S. futures are down at the time of this writing. Everyone seems to be talking these markets up and I am not convinced. Admittedly, we saw stronger action last week than I had anticipated. I do believe that we will see some profit taking and I don't expect the S&P to easily run through 920 like some of the talking heads would have you believe. I think we are in an area where the market is expecting bad news, but if we see sustained bad news, it will create a new dynamic. I think the fundamentals are getting worse by the day as world bankers continue to print money. If we start to see inflation before we see employment improve in our country then we could break 5000 on the DOW. I said IF and I don't see it near term, but things are not as rosy as many of the pundits would have you believe.

We have been having the inflation/deflation debate on this site for quite some time and I thought that we would settle it with a Jim Rogers interview that was done recently on Bloomberg. I have attached it to the bottom of this post. Of note, Mr. Rogers says that at NO TIME IN HISTORY HAVE WE HAD ALL CENTRAL BANKS PRINTING SO MUCH MONEY AND HISTORY SHOWS US THAT IT WILL LEAD TO HIGHER PRICES. He talks about how low many of the commodities are and that is even unadjusted for inflation. He used the term forced liquidation several times during the interview (we only have one part posted here). I have said that we are going to see much higher prices because when this all settles out we are going to see that the forced liquidation has caused prices to over correct. The over correction will cause demand to heat up faster than normal---and the rest will be history. Mr. Rogers believes that the dollar rally has been because of so many positions being unwound. He didn't seem to be buying into the "dollar is stronger simply because we are in better shape than everybody else" theory---even though he did say that some of the European countries are in really bad shape. He does say that a lot of other countries are feeling the ramifications of dealing with our companies. So we are having an impact, but it is in a negative way from our companies slowing down---not in a positive way because we are still so superior.

I had planned a longer post, but I will leave it at this---watch the video and you decide!!!!