Friday, February 27, 2009


When I refer to turning point, I am talking about the inflation/deflation part of the cycle NOT THE MARKETS. I think we are seeing the end of the downward spiral in prices. Now we will see volatility, but I think commodities are ready to take the turn. I believe the oil prices will see both increased demand--and will also see the reality of the reduced supply as a result of the previous production cuts. I believe that we will have a bigger "fear" premium in oil over the next 18 months than we see in gold. And I think there will be a substantial fear premium in gold.

Bernanke has painted himself into a corner at this point. He has to continue with his thesis that we will see recovery by the end of this year. This most certainly means that he will have to announce a change in posture on inflation. I agree that during the last six months we have learned beyond a shadow of a doubt that both economists and traders are more scared of deflation than inflation---BUT THAT DOESN'T MEAN THAT THEY WILL NOT REACT TO INFLATION. The reaction will bring money into oil and other commodities at paces just as fast as we saw the exit when we started the downward spiral.

This morning the futures are down and Citi is getting HAMMERED. What group of idiots would be surprised about Citi? Nationalization is the only hope for this stock and that will be awful for the entire system---so THERE IS NO GOOD SCENARIO FOR CITI.

I was wrong about a rally--we tried it, but it failed. I guess even the technical traders can't muster any balls to buy at this point. I was hoping for a rally as an opportunity to add to shorts.

As inflation takes hold, we will see the decline of the dollar and the spiral begins.

We are focusing on our trading today, but will add to our inflation thesis with several posts this weekend. IF YOU DISAGREE MAKE COMMENTS BELOW. WE WILL RESPOND AND WANT TO CONSIDER ALL SIDES OF THIS EQUATION!!!! LETS MAKE THIS SITE A GREAT EXCHANGE OF IDEAS BY USING THE COMMENT SECTION.
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