Wednesday, October 31, 2007

The Fed has spoken

The Federal Reserve cut interest rates today by ¼ point… blah, blah, blah… you can get that B.S. from CNBC. People read my stuff because I get to the f$#**%! point.

Here is how the headlines should read (if I were the editor).

“The Federal Reserve has decided to abandon the U.S. dollar in favor of trying to save housing. The Dollar is going down like Paris Hilton, while Oil is going to pull a Tony Soprano and blow a hole in the back of the U.S. economy’s head. As the Fed can’t save both the $ and housing, they chose housing, since homeowners vote- and foreign U.S. bond holders do not. You see, Americans wouldn’t know how to save money at gun point so there is no chance that the Fed had to concern itself with hurting the consumer’s savings – he doesn’t have any.”

My first of many bows...

Oh, and by the way, the December crude oil contract is trading at nearly $96 in aftermarket trading. $100? Don’t worry about $100 oil. Worry about $300 to $500 but not $100. Worry about empty gasoline stations. Worry about long lines at any open gas stations if the government institutes rationing (and eventually, they will, even though it is the absolute dumbest thing they could possibly do). Worry about spiraling food costs. Worry about political repercussions… just don’t worry about $100 per barrel oil, because it won’t be there for long.

I wrote my first piece on oil when the front month crossed $40 per barrel. My clients thought I had slipped a gear. I remember feeling some sense of vindication when, several months later, National Geographic ran a cover story titled “The End of Cheap Oil” for their June 2004 edition. I sent copies to friends and clients. They told their secretaries to tell me that they were not in. I learned not to bring up my oil theories until clients were with me long enough that I did not appear as a fear monger. What a difference 3 years and oil near $100 makes.

This does not mean that Oil could not experience a significant correction, it certainly could. It could also climb straight to $150 without blinking. That is why trading is such a hard way to make a living. The trend remains firmly in place, and unfortunately, “you ain’t seen nothing yet.”

Mentatt (at) yahoo (d0t) com

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