Wednesday, September 17, 2008

What UP?

I gotta take my hat off to Henry Paulson.  

I may disagree, intellectually, with the idea of nationalizing the financial system, but when it comes to excellent execution on the move - Paulson is pretty darn good.  Give the devil his due.
While Paulson's firm might be guilty of starting and profiting from the disaster, it is Paulson, not Bernake, Bush, Greenspan, etc... that might keep the system from imploding in 2008/2009.

This is sort of like the presidential campaign for me.  I don't have a dog in the hunt, I am not trying to convince anybody of anything, other than how to interpret the environment so that we can best profit or avoid loss.  Paulson has bobbed and weaved, never letting principal get in the way of doing what is most expedient, exactly what a trader should do. I am SOOOO impressed with the mercenary son-of-a-B. Remember, in his current capacity, he represents the president as principal, and he has executed brilliantly - SO FAR.  That means he ain't out of the burning building/woods just yet... and ANYTHING can still happen.  YOU need to know that.


If you have been reading my stuff for a while, you know my call on residential real estate, the financial system and the companies that would fail has been spot on.  Unfortunately, my RESPONSE call, to own Gold and Silver, has not exactly worked out according to plan (especially Silver) - SO FAR.

The egg on my face is a GIFT to you.  If you didn't buy them when they were down, and you are not buying them here, I think you are doing a disservice to yourself.

The only market that has not blown up yet is the U.S. Treasury market.  That market is in a BUBBLE as I write this.  I have no idea WHEN it will blow up, but I have bet my bottom $ that it will, and one of the beneficiaries will be Gold & Silver.

Not that you will get rich investing in Bullion.  Unless you use leverage, which I caution you NOT to do, you will not.  But at least you will have something of value left.  Particularly for you folks 55 and under.  When it comes time for you to go ugly early and grasp the social security brass ring and begin to liquidate your portfolio in 10 years or so, you are going to be sorely disappointed at best, and more likely angry and bitter at the purchasing power of your financial assets.


How many folks have noticed that the Financial world is coming undone - and crude Oil is $100 per barrel even after an UNPRECEDENTED  20% + rally in the $ (remember the inverse relationship of  commodity prices to the currency)?  Crude is up 900% this decade even as our financial system is in collapse!  What will the price of crude be if we right our economic ship?  What will the price be if you compound that with a retracement of the US$?  Don't listen to the Media angle on this.  They serve a different master.


It is a tough market out there.  Lower highs and lower lows, not the stuff that engenders confidence.  But opportunities do exist in the energy sector.  That is all I can say.  Be smart, and don't be a true believer.  That means be disciplined and take losses when you are wrong.

We are entering a very different phase in the crisis.  The credit bubble is at least half deflated, but I see little possibility of TPTB being able to reinflate.  Oil is THE ingredient that runs the economy, but if the economy is not running, it won't need as much oil.  The data at THIS moment says one thing, and can say something else the next.  It is all about the data.

Good Luck!

Mentatt (at) yahoo (d0t) com


Bureaucrat said...

Jeffers, you must be out of your freaking mind. This guy Paulson is putting the rest of the country on the hook for hundreds of billions of dollars (FNM FRE $200 billion, AIG $85 billion, FDIC bailout money, RTC startup money, etc., etc.), to be triggered if anything goes wrong long after he has left. We have no money. The Treasury doesn't and the Fed doesn't. It all has to be borrowed, borrowed from the same dimwit foreigners who trusted us in the first place. They have already been screwed. How much more they gonna lend us? There is nothing to admire in this, except that Paulson has learned his craft well: grab the money while you can, and leave the bill for someone else. There is nothing to admire here.

Greg T. Jeffers said...

I never said that I AGREED with his actions... only that he is handling the heat and is executing brilliantly a very, very flawed strategy.

I would have let the markets crash.

Greg T. Jeffers said...

BTW... Paulson is NOT the boss. I was only commenting on what a competent mercenary SOB he is.

Anonymous said...

I agree with Greg. It's the old idea of "I might not agree with the way X does his job, but I'm sure glad I don't have to do it." Real easy to bitch about the other guy when we ourselves, actually, have no friggin idea about how to do their job.

I freeze (or at least hem and haw) just trying to make decisions about my own life. I can't imagine Paulson's courage level. Maybe he has a pitcher of ice water for breakfast! I would have long since packed a bag and headed for some place in Africa where "nobody knows your name".

Bureaucrat said...

You may still get your wish on the markets crashing, if we borrow any more money ...

Donal Lang said...

And another great idea this morning - shovel all the financial shit into the basement, lock and seal up the door so you can try to ignore the smell.

Then give the doorkeys to your kids so they can pay for the clean up!

I'm glad I'm old.

Anonymous said...

You guys are not seeing the dire implications of all this....

We are heading toward a global selloff of all USD paper- maybe all anglo paper. It means a massive perception around the globe that the USD is a toxic hole for capital. It means a sudden cutoff for financing the 10 trillion buck national debt. It means all of those 5 billion bbls of oil we import yearly (our economic life blood) being no longer buyable with USD- gold or euro/yen only thank you. It means no more credit for the 800 billion yearly trade deficit. It means a national default coming up.....

The 275 billion USD we pay in interest on the national debt(due to our reserve currency & petro dollar status) will no longer apply. Try 1-2 trillion USD a year interest payments on that debt. Hello IMF.

I never thought it would actually come to this. And we don't have a lot of friends left at this point. And our enemies are probably going to figure it is worth it to take the hit and move on w/o the US hegemon. Brace for impact.

Hope I am wrong on all this.

Donal Lang said...

To the last Anon;
You're probably right. But it may work until George W. has handed over the keys.

I actually think this could easily be an end to fractional banking in its current form - who can trust it after all this?

Is there anyone who still thinks 'self-regulation' works??

Viv said...

Dr Bakhtiari's Phases of Transition
for peak oil.

"The four Transition periods (T1, T2, T3, and T4) will roughly span the 2006-2020 era. Each Transition [will] cover, on average, three to four years.

"The major palpable difference between the four Ts is their respective gradient of oil output decline -- very small for T1, perceptible for T2, remarkable in T3, and rather steep for T4. In fact, this gradation in decline is a genuine blessing for those having to cope and adapt.

"It should be borne in mind that these four Ts are only an overall theoretical structure for future global oil output. The structure is thus so orderly because [it is] predicted with 'Pre-Peak' methods, 'Pre-Peak' assumptions, and [a] 'Pre-Peak' set of rules.

"The problem is that we now are in 'Post-Peak' mode, and that none of [the] above applies anymore.

"The fact of being in 'Post-Peak' will bring about explosive disruptions we know little about, and which are extremely difficult to foresee. And the shock waves from these explosions rippling throughout the financial and industrial infrastructure could have myriad unintended consequences for which we have no precedent and little experience.

"So the only Transition we can see rather clearly (or rather, we hope to be able to comprehend) is T1. It is clear that T1 will witness the tilting of the 'Oil Demand' and 'Oil Supply' scales -- with the former dominant at the onset and the latter commanding toward the close (say, by 2009 or 2010).

"But even during that rather benign T1, the unexpected might become the rule and the orderly 'Pre-Peak' rapidly give way to some chaotic 'Post-Peak.'

"In any instance, the overall structure of the 'Four Transitions' is a general guideline for the next 14 years or so -- as far as global oil output is concerned. In practice, reality might prove to be worse than these theoretical Transitions; but certainly not better."

Looks like we're in T1 , we're post peak NOW! the Net oil Exports graph's downward trend is unmistakable.

Anonymous said...

So if Treasury bonds are going to collapse...should I lock in my mortgage now? I close Nov 11th...

Just wondering...

Thanks for writing your blog. It is very informative.

Bureaucrat said...

They better not! I've got $340k in there! :)

Anonymous said...

Viv- Bahktiari's T1-T4 sequence of peak oil comes on top of the imposion of this criminal credit bubble.

I hope the USGov can get all the troops back home.

Recommended reading- "Reinventing Collapse" by Dmitry Orlov. A Russian born engineer who now is US citizen who lived and observed through the USSR collapse. Practical wisdom for living thru the collapse of the "other" superpower.