November 19, 2007
As a Russian doomsday cult waits for the world to end, the US Congress heads home for the Holidays leaving US troops hanging. But Lets face it unemployment is very low, inflation is moderate and interest rates are very low so what gives with all the doom and gloom? One look at mall parking lots and all the traffic jams this weekend would suggest that dreams of a recession may be postponed a little bit longer.
This market continues to be characterized by periods of severe over sold conditions, leading to significant reversals to the upside. There seems to have developed a tolerance to steadily climbing oil prices, but price spikes in the liquid gold continue to bring the house down. Look for a big rally in stocks, oil prices will recede on the expected warmer winter, the dollar will stabilize and China and other emerging markets will decline from an extreme over bought position as inflation begins to pick up. Investors money flows will favor the US and its much undervalued markets, particularly tech and bio tech.
But what out the dollar you ask, once again I repeat the US consumer has carried the world on its back since the early 1980’s. The dollar is transitioning to better position US manufacturing to export to emerging market consumers and the US economy is transitioning back to production from consumption. Its not that the US is going to stop buying things its just that emerging markets growing middle classes are going to consume at the much faster growing pace.
So what’s going on, I am warning of bubbles on one hand and saying buy buy buy on the other hand …Some sectors such as commodities and emerging markets seem very over extended to me for some time,yet no one is talking about it . Sell offs are never predicted by by the main stream press or the pundits ,they generaly appear out of the blue…..
James J Foytlin