Strictly: Drilling II Message Board

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Strategies & Market Trends : Strictly: Drilling II

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To: c.hinton who wrote (19629)	9/29/2002 7:15:52 PM
From: SliderOnTheBlack	Read Replies (3) of 36161

Bonds are Part Deux of the great "MISALLOCATION OF CAPITAL" story... While no one any longer disagree's that we are now witnessing on a daily basis, the aftermath of a historic misallocation of capital in a post speculative bubble meltdown of historic market proportions. Sadly; we are heading into unchartered territory with part deux of the "Misallocation of Capital" story...ie: the Bond Market literally sucking up all of the liquidity (capital) intended to fuel the US Economic recovery. And now the Fed is starting to crack... and is now beginning to show it's first signs of disention - ie: the 2 recent desenting votes on whether to cut rates during the recent Fed Meeting. Sir Alan will one day be best known for letting Robert Rubin and the Investment Bankers literally rape, pillage and otherwise plunder the investment class & their Pension Funds (that's a coming story) during his watch and for of course failing to walk his own talk and to reign in "Irrational Exhuberance" when it was still "reignable" ~ JPM is cracking, now Citigroup as well, Merrill in big trouble etc.... the talk of a "Derivatives Crisis" looming has now reached a decibel of almost daily mention in the media... one recent former Fed Govenor speculated that we may "lose" 2, maybe 3 of our "large US Banks" before the final Chapter of the Legacy Sir Alan is written... Potential Rogue Wave Events are literally surrounding this market. Deflation ? More domestic terrorism ? War in Iraq ? $60-$100 Crude Oil ? ...Weapons grade Plutonium once again captured in Turkey - a mere 150 miles from the Iraqi border... and we STILL have valuation multiples reflective of a classic Bull Market ? It would be hard to believe that FUNDAMENTALLY on merely a correction to valuation multiples more reflective of today's geopolitical & economic climate - that we don't have at least, another 25-30% broad market decline yet to come ...and then we should probably add a Risk Discount to that for all the Puplavian Rogue Waves out there on the horizon. We're seeing and hearing about derivatives in the same way we saw and heard about the cracks forming in Enron & Global Crossing.... at first; all the early warnings were admonished as over-the-top Bear Musings... then the media began to pick up on the story, then the stocks started to crack... then the stories broke; then the stocks crashed and the entire stories came out... I have no doubt that we're heading towards a Derivatives "Event" and we look ready to test the idiom of "Too Big to Fail & Too Big to Bail" relatively soon. Sadly, for the Investor Class... the fractures appearing in Pension Funds are potentially a much bigger and dearer story looming in the wings. History is our greatest teacher and most reliable roadmap in "times like these" imho... and history has shown that "War's" occur when we most "need" them and that "War" is certainly inflationary... and as we are now seeing and hearing the warnings of Deflation almost daily... the Fed surely is going to be forced to overswing to the inflationary side and of course our old FOI EST TOUT friend GOLD stands waiting on the wings ready to begin yet another historic chapter in it's long history... ...all in all; we're probably both only in the 5th Inning of this Bear and only in the 3rd Inning of the Gold Bull. A recent article on Gold's past speculative move's; pointed out that something on the order of 75% of the move in price occurs in the final 10% timeframe of the cycle. ...interesting thought. The next leg down for this Bear is the one that will do the most psychological & sentiment damage imho. It will cause of repudiation of stocks... where no one will be talking about buying dips, let alone... buying - period. People will continue to pour money into their homes, to buy real assets and commodities will begin yet another of their historic up cycles...and Bill Gross's "Born to Lose" essay will be driven home to yet another generation of investors who bought into the irrepressible fatal attraction of yet another - "this time it's different" Speculative Mania. Gold - NOW more than ever ! (and as the song goes): We've only just begun ~

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