John Pitera's Market Laboratory Message Board

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Strategies & Market Trends : John Pitera's Market Laboratory

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To: John Pitera who wrote (7474)	12/8/2006 9:29:02 AM
From: Hawkmoon	Read Replies (1) of 33421

One is that the price of 30-year U.S. Treasury bonds will rise as the U.S. economy slows and deflation sets in. Another is that the dollar will strengthen against the euro as investors scale back investments in emerging markets funded by borrowing dollars. And the third is that energy stocks will keep climbing along with the price of crude as world oil production reaches its zenith. WOW!! Tremendously risky plays!! I can see where he might make some money on bonds, when the Fed is forced to resolve the inverted yield curve by dramatically lowering rates. But isn't China selling US Treasuries in an effort to diversify from US assets for the purpose of increasing the value of the Yuan against the dollar? But with today's job report, can the Fed make such a drastic reduction in interest rates? As for oil prices, the Saudi stock market has crashed some 60% since February, which would seem to indicate that they have little taste for maintaining high oil prices (needing all the revenue they can get), along with the fact that "peak oil" was just handed a tremendous blow by Daniel Yergin and CERA: cera.com It strikes me that Tar Sands and other sources of oil will begin to act as a price mitigator on higher oil prices, minus some kind of major conflagration in the mid-east. As for scaling back on emerging market investments and the impact on the dollar, I really have no understanding of these relationship, so I can't make an assessment. But oil prices have been artifically driven by the confrontation with Iran for at least the past year. I don't see this reoccurring, should the recent recommendations from the ISG report be implemented. Talking with Iran is far from confrontational. However, their obtaining a nuclear weapon and uttering aggressive rhetoric about nuking other countries in the region might. But then I see SA and other PG countries seeking either closer ties with the US in order to benefit from our nuclear umbrella, or developing them on their own. Hawk

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