Tuesday, September 1, 2009

Back in th Saddle

OK, I am back. Hope the summer has left you all well.

Forget the summer recap, here is where we are at the moment:

1. The entirety of the "recovery" is government spending - either dubious or simply bringing demand forward. The tax credit for home purchases has increased the number of $150k homes being sold ($8,000) is a large percentage of any such purchase, and the cash for cluncker thing has completely destroyed 2010 (next year) for the autom makers.

2. Oil imports continue to decline and the rate of decline has accelerated. 2008 from 2007: -8%. 2009 from 2008 - 8.6%. A couple more years like that and the rest of this is moot.

3. Natural Gas continues to decline in price with storage in the U.S. hitting "Full
this year earlier than any previous year. Still, there simply is not enough NG to make up for an 8% decline in Oil imports. At some point this will be the investment opportunity of the century, but that point might be over a year away. More on this latter...

4. The US$ has fallen near its all time low on the Dollar Index. (While I have laid a substantial bet that the US$ will rally from here... if I am wrong we will have a host of issues to contend with... ergo this bears watching VERY closely).

5. Obama's halo is no more. Whenever a sitting president's aproval rating falls 30%+ in a 6 month period one must look at the spec markets with extra trepidation. We have been short the equity market for the past couple of weeks ( our bet is the market will have at least one really good sell off before 12/10m and are finally in the black on the trade) and believe that a harsh turn in the equity markets will come at some point.

6. The US$ caught a bid today, and as expected the US equity market got slammed.

7. Precious metals have gone nowhere of late, and if the US$ catches some air they will might well correct. I took delivery of a serious amount of Silver and Platinum, and still own GLD, but I want to buy Gold lower.

8. Delflation is still winning, despite the US equity market's recent rally (IMHO).

Now, onto where wer are going...

Do NOT believe one word out of the Anti Christ, er... Goverment Sachs. GS is out there telling folks that the recovery has taken hold and its all go from here. I give that a less than 30% probability, and I give a 30% probabilty that we will just muddle along for 3 to 8 years or until the energy shortage really hits us, and a 40% probability of a significant doulble dip. So... 70% flat to down, and 30% the Anti Christ is right.

I am DIEING to see what is on the Fed's balance sheet. It would appear that Ron Paul's "Audit the Fed" bill will pass in some form, especially now that the American People have scared their democratic lawmakers half to death over the issue... even Barney Frank is suddenly in favor.

I will buy lunch for the pro-choice, pro-big government, vegetarian (I will have to hold my nose but a deal is a deal) of your choice IF it turns out that the Fed was NOT buying S&P futures either directly or through a proxy earlier in 2009.

The Fed lost an important court decision a couple of days ago and now will have to disclose terms and loans etc, to their favored institutions. This ought to be good, and I think one of the reasons for today's sell off.

Lastly, as I told all of my readers he would, Obama reappointed Ben Bernake, GWB's pick for the Fed. What, exactly, is the big difference between BHO and GWB?

BTW... the recent rally has given older folks an excellent opportunity to move out of equities and into short to mid term Treasuries, cash, and if they correct, precious metals. Equities just ain't worth the risk/reward. You can trade 'em, just don't believe 'em.


bureaucrat said...

Some of the high-paying dividend stocks are doing decently. The older folks are trying to run away from near 0% return on CDs and Treasuries. I have some money in TEG which has around a 7% yield, and ATT isn't too bad (15% tax rate on both). Where else is there to go?

Oh, by the way, gasoline demand is exactly where it was a year ago. We're still burning a LOT of oil in this deflationary-depressed country.

Publius said...

Welcome back, Greg. I missed you!
You stuck to the econ stuff, but what do you think a much-hyped flu pandemic might do the economy, and what about a possible strike on Iran? Do your libertarian feelers go into that kind of stuff?

Don't you have the feeling that something is going seriously wrong with this country, and that devolution is a real necessity if we are to survive, let alone thrive? What I mean is that we need to shorten our personal, familial, and community supply lines and dependencies. Something evil this way comes....

Greg T. Jeffers said...


Older folks should be concerned with return OF their capital, not return ON their capital (IMHO).


Stay tuned.

Anonymous said...

Agreed. Although if we get the $ rally you are talking about, the bottom will drop out of the metals, precious and industrial. Soft commodities might hang in.

The VIX is telling you this equity market is about to roll over. And try a pattern match of March-August 2009 with Nov '29 - April '30. Hmmm. Both are rallies within recessions whose main cause is the implosion of credit.