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Politics : Welcome to Slider's Dugout

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To: SliderOnTheBlack who wrote (4613)	2/28/2007 6:50:24 PM
From: jim_p	Read Replies (3) of 50416

Here's my take for what it’s worth: 1. The US will be in a recession prior to the second half of the year, and it will not be a short and painless one. 2. Inflation will remain above the feds target rate for the rest of 2007 (Just take a look at grain and other commodity futures and it's a given that food prices are headed higher over the next year). Too much liquidity is catching up with us and a lower USD will help keep inflation high. 3. The sub-prime lending with flow over into other financial markets which will result in a credit crunch in the second half of 07 (The pendulum always swings too far in both directions and it's been in uncharted territory for several years now). We’re only in the first or second inning in the unwinding of the imprudent lending practices that have gone on now for a very long time period with 7-8 more innings to follow. The big unknown is what impact this will have on the derivatives market with all of the credit guaranties out there??? 4. The fed will be forced to lower rates despite higher inflation to avoid a panic in the financial markets. 5. The $USD will fall further when the fed is forced to lower rates despite higher inflation. So....in the short run gold will fall along with the rest of the markets as we unwind the latest liquidity driven bubble in housing/commodities and begin to pay the price for the imprudent lending practices that have gone on for more than several years. Longer term gold will rise as the USD falls and liquidity is pumped back into the system to avoid a panic. We are just beginning to see a few of the cracks in the system that have resulted from too much liquidity which resulted in the tech bubble and then on to the commodity bubble and then on to the current housing bubble. More bubbles or is it time to pay the piper??? Too much liquidity has caused several bubbles, but it will always lead to higher inflation. That’s my take. Long QID and yesterday was one of my best days in years. Jim

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