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Financial news I consider important, with my opinion, which is worth as much as you paid for it.
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Thursday, June 4, 2009

Quick thoughts

OK, I am still not updating my short plays, its really down to haveing the time. In general, they are still doing OK, with exception of BAP (ouch!).

In any event some food for thought.

Oil rallied by 100% in 5 months from low to high. If you have USL/USO/DXO, looks like a good dumping spot. I unfortunately dumped my oil a little too early.

Gold is in for a correction. If/when GDX comes close to 38, its a good entry point to start buying. Be prepared to buy GDX between 38 and 28. I actually think it won't hit below 35, but what do I know? Unless we have an all out market collapse, I can't see GDX hitting below 28 again.

I am trying to aviod day-trading gold miners. I am holding for the long haul. Also get the benefit of much lower taxation for holding over 1 year.

Other commodities may pull back a little as the market takes a breather.

Latvia looks like it may collapse. If this happens this is in-line with 2009 predictions made back in January. The danger here is once one of these old eastern block countries falls, the rest may line up like dominoes.

I am a little surprised to see that "China Sees ‘Grim’ Job Market, Deeper Impact From Global Crisis". I thought China was talking the party line that they are doing pretty good.

And finally Federal Reserve Chairman Ben Bernanke sounded a cautiously upbeat note. Of course he paints optimistic note. If Ben said "I expect 2 to 10 years of a recession/depression", financial chaos would ensue. Also keep in mind Mr. Bernanke "as all the answers" to save the world, he has to be optimistic.

But you gotta love this statement:
"Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth."
Translation: If the wheels come off this train, its not my fault, the politicians did it. I do agree that the politicians are screwing us all royally, but Ben's hardly clean here. Nice try ben. I for one won't buy its all the politicians fault when your doctorate thesis experiment fails.

For some great Ben Commentary, see Mish.

If I had balls, I would double up on lottery tickets if the market goes up tomorrow. Instead I'll hold what I got and hope for the best.

And finally, I lifted from Mish some great commentary: A snippet from An Economy at Risk: The Tough Decisions Ahead by Thomas Hoenig, President, Federal Reserve bank of Kansas City.
"In the long run we are all dead but our children will be left to pick up the tab".

"In our efforts to fix the oversight process for our financial system, we should not misdiagnose the patient. Unfortunately, I'm afraid we are witnessing some regulatory malpractice now. The emphasis on reform at the moment is to change the structure of the regulatory system rather than address the fundamental weakness of that system."

"Capitalism is a process of success, failure and renewal, and for it to work properly, institutions must be allowed to fail, no matter their size or political influence."

"Over the past two decades, The US has created for itself a set of economic imbalances that, in my judgment, have significantly increased uncertainty and placed economic growth at risk for future generations of Americans".

"Starting from where we are today, it is clear that interest rates must rise."

"I suspect there will be considerable pressure on the central bank to 'help out' in easing this adjustment process by keeping interest rates low for an extended period. This happens because people often confuse the establishment of low interest rates - and therefore the creation of money - with the creation of wealth".

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