Thursday, June 10, 2010

June 10, 2010 Here I Am Stuck In the Middle With You


June 10, 2010 Here I Am Stuck In the Middle With You

The year was 1972, the Band was Stealers Wheel, but the song seems a bit appropriate today. There was a great article in the Journal today by ALAN REYNOLDS titled “Don’t Believe the Double Dippers”. I suggest it worth your time. In a nutshell it says there are some influential people to the left saying, “the sky is falling the sky is falling” because they want to get political backing for more government stimulus funding. Then there are strong influential people on the right saying, “the sky is falling the sky is falling ”, because they want to let you know how badly the current incumbents have screwed everything up, so they can get elected in November. Both sides came out strong after last Friday’s weak jobs number. The term Double Dip was on everybody’s lips all week long, until today. The fact is we have had only one double dip recovery since 1933. If you care it was in 1980-82 after the fed slashed rates by 51% and then raised them by 101% in response to some pretty predictable inflation.

Anyway the balance of the article is quite interesting but my take away, which we will share now is, read the data, not the sound bites. If you read the Fed’s Beige book, and look at the employment numbers, or count rail cars or look at the trucks (to see if they are riding high-empty or saddled low-full) next time you are headed to Las Vegas or where ever your next road trip takes you, but just do the homework on the data. Overall, the tells are optimistic, cautiously optimistic, but optimistic none the less.

So the market was up about 3% today. That means either my guess of a down week was wrong, which is good thing, or we are going to have miserable Friday. I am hoping I am wrong.

So what triggered this great day. It still goes back to the comments here on Sunday night. No News is . . . last night we had the opening of the Japanese Market and there were some very rosy numbers concerning their GDP. That was followed later in the night, their day by some very robust export news out of China, and then there were some sign of economic stability in Europe which made for some nice futures before the opening this morning, US households shed more debt, and people were feeling fearless all day long. It was fun not having any stocks to by on the dips. Gold came down a bit today after people move monies to equities and China made some less than supportive comments about the commodity. Those comments were countered by some “got to have Gold” by JP Morgan.

Ok, I just read this and it was pretty weak. How can you make money with drivel like that. You can’t. While it is a bit late, here is a little play I am making. If you look at all the good news out of the US (Think Rail Cars Here) and China Exports (Think The Baltic Dry Index), and you look at world inventories of crude oil, there are at an inverse relationship. Demand is improving and inventories are a bit down (Actually in the US they are at a four month low). Take all of that and figure in a deep and shallow water moratorium on drilling and? What might happen to oil futures? So go out and buy oil. That’s right save all those plastic bottles your water comes in and call up Chevron (We Own Chevron) or call Conoco or Exxon, I would not suggest calling BP as they are a bit distracted right now and buy that black gold. OR you could look at the ETF Fund USO. It is trading way below its 200 day average and just coming off some recent lows at 34 ish. I am in tomorrow at 34ish and will look for 40 by summers end. Put a stop in at 31.25 to protect your backside. If you real gutsy, take a look at the July and September Calls on USO. BUT remember keep an eye on your downside and the topside will take care of itself.

BTW in a couple of Days I will have posted 200 posts to Salve Lucrum.

Salve Lucrum


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