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Politics : Welcome to Slider's Dugout
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To: inchingup who wrote (6854)11/2/2007 1:19:23 PM
From: jim_p  Read Replies (3) of 50729
 
Here are a few facts that are hard to dispute:

1. Inflation is clearly on the rise due to a lower USD, high energy prices, food inflation and wage inflation in developing countries (the perfect storm for higher inflation).

2. Long term interest rates will have to increase due to higher inflation and also to be able to attract foreign capital as the value of foreign US investments declines.

3. The credit crisis is nowhere close to coming to an end, the very fact that the banks and brokerage firms refuse to disclose the amount illiquid securities they are holding that have questionable values should tell you that we have not even seen the tip of the iceberg yet.

4. The lack of transparency in the credit markets will come to an end after the FYE audits are completed. The auditors will not be able to allow Merrill to write down their CDO's by X% and let Goldman write down theirs Y%. There will have to be some standard that all of the players will have to live by if they want a clean audit.

5. Higher energy prices have always brought on new supplies in past energy cycles. The fact that oil prices are now over $90.00 and inventories are not increasing is very very concerning. You can bet that at $95 per bbl every producer in the world is producing at their maximum capacity, including SA.

A reasonable person would have to conclude the following:

1. We will not have transparency in the credit markets until March 08 at the very earliest and the fact that no one is coming forward with any disclosures now tells me that the problem is a lot worse than the markets are currently aware of.

2. Energy prices will continue higher until the world's economies come to a grinding halt. There has never been a time period in history when we have had economic prosperity without abundant energy supplies at reasonable prices.

3. Without abundant energy at reasonable prices and without new credit expansion at reasonable prices the odds of not having a serious recession are about as close to zero as you can get.

4. This is a time to stay short the markets and trade the volatility. Take profits on days like yesterday and add to shorts on any rallies.

JMHO,

Jim
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