He is back!

June 24,2005

Hello,
The Recent sell off looks less about oil prices than and more about the Supreme Court attempting to usurp your property rights. Remember property rights are fundamental to the establishment of all other rights. The greater a society goes about protecting private property rights the more successful and prosperous a society is. News of the Supremes decision to allow government to size your property sent the market reeling. Check the time line on the ticker if you don’t believe me; as soon as the court ruling came out the market tanked and besides oil stocks did not have a particularly good day at all. Since the court left it up to local authorities many states have already passed resolutions forcing the adherence to the strictest definition of property condemnation. Thus we seem back on track with our summer rally by the following Tuesday.

It has been said that there is a sucker born every minute, well I am not sure it is every minute but it certainly at lest once or twice a year. Once again with the help of the mainstream media Warren Buffet the Oracle of Omaha, the Sage of long term value investing is promoting his latest dallies into the stock market. In the past these messages have signaled the tops of markets rather than a buying opportunity. If you don’t believe me ask anyone who bought silver when, the oracle was purported to be buying it. Remember he like everyone else is in the business to make money, not give you free investment advice.

I continue to believe that the higher oil prices have slightly depressed economic activity .Unless they go to some extreme new highs the tremendous productivity growth of the last 4 years more than offsets the “inflationary pressures” and increased direct real costs to consumers. Higher oil prices have indirectly kept interest rates low which is significantly more positive than higher oil prices are a negative in to day’s economy. In the long run higher oil prices may force even greater efficiencies increasing productivity even more. What is too high of an oil price? I am not sure but I am certain it is significantly higher than the current price, my bet somewhere higher than the $90 a barrel seen in 1980.

James