Tuesday, December 9, 2008


It looks like these markets are finding support. Today was one of those days that could have really gone south during the last hour of trading, but it held in there. Did you notice gold today? It was moving up as I think it will. I really like FCX right here under $20. It may be volatile for a while, but it will be a long term winner.

Dennis Gartman was on Fast Money tonight talking about how some of the foreign nations are so economically strapped that they have to just keep pumping crude--even at these low prices. Inflation Factor? Yes, it will be great for us to see continued lower oil prices, but it will continue to heat the economy. Gartman was talking about natural gas as well!!

I try to continually revise my theories to help my timing be as accurate as possible. So let me play devils advocate on my own position. Lets say that the foreign nations are really in a jam and have to keep crude flowing faster than ever. What happens if this situation were to last for a couple of years? Consumption and more consumption. Look back at how much of a surprise it was when we saw the demand destruction with gasoline over $4 per gallon. Remember how fast it happened and what a shock it seemed to be at the time that we would actually change our consumption habits? If oil stays low for that period of time, we will see a rebound in consumption that will make the demand destruction seem slow and small. By the time we notice--inflation will be out of the bag.

I try to ask my self obvious questions to see how the market may not be acting rational. I have been asking the question, How have the natural gas companies rallied over the past few sessions while the commodity itself continues to struggle? Will UNG catch up? I think so.

I have had a couple of emails saying that I sound like a broken record with my inflation theory. I have consistently issued the challenge for anyone to make comments on our site if you have a decent argument against my theory. The reason why I sound like a broken record is because I believe that the dollar will fall when the arteries of the credit market become unclogged. It is the story---day in and day out. Slowly but surely the arteries will be opened and inflation will begin. The question in my mind is not whether or not it will happen, but rather WHEN IT WILL HAPPEN. This is certainly not a single day even---it is a PROCESS. You can make money with momentum and never let it be said that I have said anything to the contrary. However, I believe that this story is clear and I am trying to position myself to take advantage of the entire process. Are my trades on this theory down right now? You bet!!! Do I think I will ultimately make money? YEP



The Inside Skinny said...

FCX will be a great buy. The metals and mining index has been forming a bottom and the technicals are are in the position to turn positive.