Sunday, November 29, 2009

Where's Warren?

The last time that it really looked like the averages were going to roll over, Warren Buffett stepped up to the plate with his purchase of Burlington Northern and injected confidence that kept the rally in place. Now with the crisis in Dubai will the markets roll over or will we have some confidence booster that sends the rally higher? Before we answer that question, lets first analyze Buffett's bet.

Buffett said he was betting on America with this play. Now before I go into this analysis, let me state that I love my country and my analysis has only to do with what I SEE happening not what I WANT to happen. Was Buffett betting on the return of our economy or was he getting dual bang for his buck, by betting on coal and propping up other investments with his rally cry? I am of the opinion that Warren's bet was more a play on the fall of the dollar than anything else. Was he betting that coal was the only reliable source of energy that we will be able to afford? Was he betting that Congress is going to continue to push for protectionist measures and that coal would be a great play on those policies? Does Buffett understand that the American consumer still wants to buy, but the American voter is becoming more slanted toward entitlements? Does he know that the best place for a borrow and spend economy to get its energy will be internally? What do rails haul? A LOT OF THEIR REVENUE COMES FROM TRANSPORTING THE VERY THING THAT FIRES MANY OF THEIR ENGINES===COAL. So you get paid to haul what becomes not only the cheapest source of energy but perhaps one of two only affordable sources---with natural gas being the other.

Now one might argue that if my thesis is correct, why Buffett didn't bet on natural gas. It is cleaner, and we all know that "greener" is better, right. To that argument, I would question where the All-American bet would have been. There was no single investment that would have been as a diverse bet as the rails in the natural gas space. The old saying that "transports lead us out of a recession" may very well be seen again. I think right now after all the hype, I will let those smarter than myself chase the rails. As for Buffett's bet, I think he may have made a good one--albeit for different reasons that were hyped by the mainstream media.

I personally think that I may take a look at the natural gas transporters such as MMP as a way to play this economic environment. I clarify that statement by saying I am going to be very watchful as to the overall direction of the market before I commit any new "bullish" capital. I am currently holding FAZ, SDS, FCX. As always that is subject to change rapidly.

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Given the other nations that are far ahead of us on a percentage of GDP basis, is the debasement of the dollar overdone?

Is the fall of the dollar in anticipation that this government will push us farther up the list?

Given the other countries on the list, is a major correction for the EUR/USD eminent?

Has the last 15% rally in the major averages been attributable to the fall of the dollar and if so, how far will the correction in the averages be if the dollar rallies significantly?

Will Santa Claus deliver one of the greatest December declines in history in 2009?


We will have more tonight!!!!
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