Thursday, April 24, 2008

Oliver Twist


Like Oliver Twist once said,”I want more”, first there were maze riots in Mexico now there is rice hording at Sams Club,I haven’t had this much fun since Johnny Carson started the toilet paper shortage rumors in the 1970’s …yikes and just like the seventies “the Saturday Night Fever’ portfolio is staying alive set up to take advantage of raising inflation a weak currency ,more onerous and stupid regulation and higher taxes. The sector focus is and should remain Energy, Precious Metals, Commodities and Agriculture .There is nothing as much fun as making money of other people’s foolishness especially when there is so much foolishness to go around, it looks like easy pickings. Again stick with the “Saturday Night Fever”, portfolio which is made up of sectors that thrive in a higher inflationary environment and the self inflicted shortage that over regulation, higher taxes and price controls always brings about.

Short term in an odd twist the US dollar has staged a rally today, my guess is that the FED is about to curtail its interest rate cuts which as I have stated time and time again were the wrong medicine applied to the current banking crisis. Since the Bear Stearns debacle the FED seems to have sharpened its focus on the secondary market for mortgage backed securities which is the real center of the problem.

In the short term you may want to lock in some gains on Ag ,Energy and Precious metals as the dollar rallies, or use the weakness as a buying opportunity depending on your portfolio and cash situation. Banks and financials have also started a counter rally though it still seems like a bounce and again the road to recovery is littered with “almosts” so its best to do a lot of home work.Remember commodity cycles are punctuated with enormous corrections along the way.

The strong Euro is also killing European manufactures and curtailing EURO exports as wells as the tourist trade which Europe is so over dependent on. The ECB may soon be facing a slowdown of similar magnitude to the US so it’s not much of a stretch to expect significant rate cuts. I think the ECB is a bit behind the curve and should have been cutting rates already.

No comments: