Wednesday, January 14, 2009


I was expecting us to gap higher this morning as about this time last night the futures looked good. And then we get reports from the Euro Zone. The recession/depression collapse looks to be worldwide. Natural Gas has been absolutely decimated. The dollar is strong and many of the taking heads on television are suggesting selling gold short. There are times when an increase in commodities prices means a decline for the stock market as the expectation of declining margins dominates the though processes of most traders. In times like today--commodities and the markets fall together as both focus on the global economy and falling demand for goods and services worldwide. I did not expect it to last as long as it has---but now it seems that we are stuck right here for quite some time.

The dollar has been strong as other countries have been as weak or weaker. I personally believe that the government is buying dollars in an effort to fight inflation. We are continuing to throw good money after bad. I own shares in Bank of America in my IRA. That company now needs more cash as it tries to absorb Merril Lynch---but in all reality I should lose my entire investment. The concept of too big to fail is going to be applied for our country if we don't quit issuing IOU's like they are going out of style. We should let BofA fail. They should go into a structured bankruptcy and individual depositors should be made whole and individual investors should lose it all. That is the only way we will get the economy going again. If we keep propping them up and then attach forced lending practices upon them---it will be like getting knocked out in a prize fight and then going into an immediate rematch without studying the opponent. If you do that---you are destined to get yourself another ass whipping and it will most likely be worst than the first one.

I am watching one of our fine Senators say that we must restore credit BECAUSE OUR ENTIRE SYSTEM RUNS ON CREDIT. AND MANY OF YOU HAVE ARGUED THAT THE CONSUMER HAS LEARNED ITS LESSON. Are you ready for credit crisis round 2? I have said that you must be nimble in this market---if we don't stabilize early tomorrow---I will sell everything that I own and wait for clarity. This could be the beginning of a major major decline in the equity markets. We saw no sign of the "bounce" that I thought we would see today.

We need to see oil stabilize then we could see the equities rebound--but if the commodities downward spiral continues---we will see major pain in the equities. Be nimble or be out. I think the dollar is still key here. The strong dollar has put downward pressure on oil and if that reverses---we could see a reversal in oil. THERE IS SO MUCH UNCERTAINTY RIGHT NOW. I was halfway tempted to make a short-term bullish call tonight just because all of the "experts" agree that now is the time to be bearish. That is generally a bullish sign---but right now why would you add stocks?

John Williams will be back on the show to argue his case for hyperinflation. I am anxious to hear John's timetable as most of the inflation advocates had already assumed that the dollar would be declining. I am curious as to what is propping up the dollar---and this better than the rest argument has about run its course. I think it has to be government intervention. We are talking about passing out the rest of the TARP money and then adding a TRILLION dollar stimulus on top of that. Trillion---and how is the dollar still holding UP? Just because we are better than everyone else---No way.


Kel Murdock said...

Te dollar, I believe is benefiting from two things right now. The first is the decline in the Euro in anticipation of the ECB slashing rates. this has been key. They have now done this and are telegraphing further easing. In addition, the commodity currencies are down due to the global economy. The Australian dollar looked poised to head much higher but has now come back. The Yen has stayed fairly stable - possibly due to discrete intervention by BoJ. Longer term though, I am in the dollar debacle camp. We cannot debase the currency to the level we are and expect the world to keep funding us. I discuss this more fully on some of my recent posts.