Friday, December 5, 2008

Pessimism Justified

Employers cut over 500k jobs in November.  This is only the 4th time that the 500k number was breached in a single month.

Our system is based upon confidence, and confidence in the system is evaporating.  It is impossible to predict ANYTHING at this time with any level of accuracy.  We simply do not know what the policy response is going to be, not to mention that this could not have come at a worse time - during the transition from one administration to another.

You see, the Democratically controlled Congress has no incentive to work with the current administration.  They can lay the blame for everything at the current administration's feet.  Not that this team has shown much talent in any event.  Our timing sucks.

Everything that the Fed has done over the past 90 days tells me that Bernake & Co. are TERRIFIED by what they see in the housing market.  Everything that I see in Oil market TERRIFIES me (auto sales fall 40% year over year... who the heck needs oil in that environment?).

This will create the greatest opportunity EVER in the history of capitalism - at some point.  We gotta get to that point in one piece.  As some of my readers have pointed out to me, there is NO safe haven.  Not even cash.  Turns out, even with all of the U.S. profligate spending that US$ WAS the place to be over the past 5 months.  Of course, the US$ had been in decline for 5 years... it then follows that a rally would not be an unreasonable expectation... except nearly every big shot investor/money manager/hedgie missed it completely... (sigh)

Let me briefly explain the opportunity.  The energy complex is the largest industry in the world.  Nothing else comes close.  The energy complex has collapsed as a result of the credit/financial crisis.  The industry has shut in virtually all of its marginal production, and raising capital for future explorations and production ventures IS NOT AN OPTION at this time and for the next several years (I know I am speaking in absolutes here... and nothing is  absolute... just trying to make a point).  It then follows that as world oil production was on a plateau for several years with rising prices and rising capital availability, that with prices declining and credit/financing dried up that production will decline until it meets demand once again.  Sometime shortly thereafter, the energy crisis will be upon us in all its glory.  This event will be a king maker for some and doomsday for others.  I know what camp I want to be in.

Good Luck!

Mentatt (at) yahoo (d0t) com

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