By James Smith from PEI.
INTEL'S PROFIT WARNING
Intel plunged 18% in after hours trading upon their
"profit warning" announcement.
Gee, who would have guessed that tech stocks were
going to plunge from Mid-September????
If you hear loads of gibberish on CNBC to the effect
that "no one could have predicted this," well you
know just how wrong the conventional analysts are
and just how useless they are.
You know that the markets can be predicted, provided
you have a good understanding of cycles.
The Economic Confidence Model has proven itself
yet again. I sometimes wonder how many times this
model will have to prove its merits before people
begin to acknowledge that cycles really do work.
In previous emails I said that if stocks did not sell
off into Mid-September, that they most assuredly
would start an even nastier correction from that
point going forward.
I have been warning repeatedly about the
risks with tech stocks. This Intel Profit Warning
is no great surprise. We knew something like
this was coming
Those of you who have been active readers of
these emails will know that I have been looking
for another leg down in the Nasdaq that may very
well equal or exceed the first leg down.
Readers will also know that we have warned months
in advance that oil would rally strongly and become
a factor in the stock market slide.
Today we see that Al Gore wants the govt to dip into
the Strategic Petroleum Reserve "now"....ie before
Nov 6th!
This is likely to backfire on Al Gore. Both Greenspan
and Summers have come out strongly opposed to
using the SPR for short-term political reasons. They
have warned that the SPR should be reserved for
Supply emergencies. Granted, Summers is now
backtracking to help save face for Al Gore, this doesn't
change the stupidity of Al Gore's idea.
How is it that someone so dumb could think himself
so smart? Granted, he did invent the internet....or
so he thinks! This does go a long ways toward validating
our longerterm view that oil is now only halfway thru
its longerterm bull market!!! In the next few years
you will see much higher oil prices. Get ready for
$60--$80 oil Once Al Gore has depleted the SPR,
we will no doubt see a Supply Shock....a time when
we really need that SPR, but don't have it.
There is no doubt in my mind that by dipping into the
SPR, the govt will be successful in damping down
the price of oil...."Short-Term!"
My concern is that once you let
the genie out the bottle, its going to be hard to get it back in the
bottle. The govt may only use small amounts of
the SPR this time around, but a precident will have
been set. The govt should not be a regulator
of oil prices in the markets. The markets should set the price
not the govt!!! Liberals are not big fans of the
free markets, so it is to be expected from someone
like Al Gore. But he just doesn't get it. Its going
to backfire!
It is a green light for oil companies to store even
less oil. They know that if the govt decides
to tap the SPR every time the price of oil rises,
they don't have to maintain reserves
any more. Its actually great news for the oil companies
because it reduces their costs of carrying oil. That's
right, it costs money to store extra oil that you aren't going
to sell immediately. This is normally the job of
private enterprise. The oil companies are the ones
with the expertise in this area.....not Al Gore and not
the govt! But Big Govt knows the oil markets better than
oil companies that do it for a living.....so thinks the man
who invented the internet.
Now that the govt is ready to take over that function,
the oil companies will reap the benefits.
DON'T BE SURPRISED IF CRUDE INVENTORIES
CONTINUE TO DECREASE OVER THE NEXT FEW
YEARS IF GOVT DECIDES TO TAP THE SPR EVERY
TIME OIL SPIKES UP IN PRICE.
THE GOVT WILL ONLY ADD TO THE VOLATILITY
IN OIL PRICES BY TAPPING THE SPR EVERY
TIME THE PRICE OF CRUDE SPIKES.
OIL SPIKE BECOMES REFERENDUM ON NEW
LABOUR!
This recent spike in oil prices has also become a
Referdum on "New Labour" in the UK. Tony Blair
is also too dumb to realize that he is promoting a
ponzi scheme that can only end in tears. The UK govt
thinks that they can get away with taxing oil more than
just about any govt on the planet. 77% of the price of
petrol in the UK consists of tax!!!!
Each time the price of oil goes up the tax burden on
drivers in the UK goes up exponentially. The tail is
wagging the dog! It is in fact
a govt sponsored ponzi scheme. It is the most
regressive tax imaginable. Everyone needs to drive,
not just the rich. But from having lived in England
for over 3 years, I can tell you the Brits have a
very high pain threshold. They can put up with
trains that sit on tracks for hours at a time. They
can also put up with some of the highest petrol
taxes in the world.
Much has been said about how quickly the French
govt caved into the protesters...and how wonderful
Tony Blair is for not caving in. But now we see
that Tony Blair is losing popularity in the surveys.
Why is that?
Because we are looking at a .........
REFERENDUM ON THE WELFARE STATE!
Europe doesn't get it. It doesn't really matter
too much whether France caved first and the
Brits held on longer. The point is that the UK
now gets a substantial amount of revenue
from the petrol tax, as does all of Europe.
The FT says its as much as 1/4 of the amount
the UK govt take in from income
taxes. Its going to be very hard for Tony
Blair to let go of such a cash cow for the
welfare state.
Much easier to let the currency absorb the shock....
which of course it has been doing rather nicely.
Today's rally in Sterling notwithstanding, BP
is in a longerterm bear market. We may one
day again see parity with the USD.
Capital is not nationalistic. Smart money
is moving out of Sterling because eventually
Tony Blair will try to take the UK into the Euro,
and even if he doesn't, defacto a sliding
BP and a sliding Euro are becoming one
in the same.
As regular readers of the email know, our
view on the EURO is for a continued slide
over the next few years. BP has recently
become more in sync with the EURO than
with the dollar.
Perhaps this is because smart money
knows that oil will continue higher in the
next few years and that Tony Blair will
eventually be forced to lower oil taxes
or stand by and watch traders sell the
currency. Traders know that HIGH oil taxes
have a depressing effect on the economy.
Up until now, it was managable, but if
oil is only halfway thru its bull market cycle,
then, there is real trouble coming down
the road. It hardly matters that oil is
now selling off and BP is rallying.
We all know that oil will not stay down.
It will come back twice as hard the next go round.
What is Tony's answer to this problem????
He doesn't have an answer.
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Best Seppo |
