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Politics : High Tolerance Plasticity -- Ignore unavailable to you. Want to Upgrade?

To: kodiak_bull who wrote (8929)	10/2/2001 12:51:21 PM
From: Aggie	Read Replies (1) \| Respond to of 23153

Kodiak, hello ..From the Residential Real Estate Crash Index thread, this has a curiously sensible ring to it: ------------------------------------------------------ Excerpts from Richard Hahn on oil and real estate: The move lower in energy at a time of increased tensions in the Mideast is quite conspicuous. The $4 drop in crude oil is the equivalent of a tax cut for the entire economy. This must be the government's strategy to bolster the economy and eventually propel the stock market. Had an opposite move happened, causing crude oil to trade near $40 per barrel, the economies of the industrialized world would have been in serious trouble. The politicians took market manipulative action to prevent dire consequences. Now we must deal with the law of unintended consequences. Regarding the recent drop in crude oil prices ($4 per barrel in one day last week), that is a remarkable event and represents a major disconnect between the market and the fundamentals. The explanation for the plunge was reduced demand from a worldwide recession. Nearly all energy related stocks were lower. The prediction of a worldwide recession did not seem to bother the general market...only the energy stocks. Hmmm, something doesn't quite compute. Let me speculate that the U.S. government struck a deal with Saudi Arabia to pump crude oil at their maximum capacity in order to drive down the price of crude oil. After all, for crude oil to spike up to $40 or $60 per barrel would kill the economies of the industrialized world. So I definitely suspect market interference. But then, there are no rules in a war. It will be interesting to see if oil prices stay submerged if a regional war develops in the Mideast. Almost without doubt, future investment results are going to be counterintuitive. For example, the rush to liquidity, arising from fear, will produce a serious dilemma. As the Fed drops the floor out from under interest rates, cash equivalents are going to earn maybe 2%. With the world's printing presses running overtime, it's just a matter of time before the inflation rate jumps to 5% or higher. That is the goal of the Fed! The net result is a negative real (-3%) rate of return on cash equivalents. That loss of purchasing power will pressure, by brute force, investments back into assets with greater returns. To me, that means money flows will be directed to commodities, real estate, and equity shares of companies demonstrating a dependable income stream. As long as we're on a war footing, the Fed will not try to contain growth. If Greenspan can ignite inflationary growth during times of war, he will be applauded by the county. Gold stocks or gold bullion should make up 15% of your portfolio. If the rest is cash, then gold will hedge your cash position against the loss of purchasing power. The unintended consequences of Greenspan's massive injection of liquidity will hit everyone. Interest rates are going to drop below the inflation rate. We will have negative real rates of interest. The printing presses running at full speed to address the worldwide grab for liquidity will eventually penalize all those who have saved money for hard times. With real rates of interest in negative territory, money will be forced out of money market accounts and savings accounts into assets with better returns. This is a heavy-handed attempt to save the stock market and mutual fund industry. It probably won't help, for we are on the road to inflation and recession and war. Until there is a new Federal Reserve Chairman and a new Treasury Secretary, there will be no safe havens for investors. ----------------------------------------------- Regards to all from the Caribbean Bunker Aggie