Thursday, September 04, 2008


If you were a republican vice-president, would it be neat to conclude a major foreign policy triumph just before leaving office and just before the next election? If you were a republican president, would it put you in good stead with the old money super wealth to time a major foreign policy triumph right in the middle of a major market turn, when a trillion dollars worth of mistakes will be made by the public? If you were a republican president would you push hard to ensure your legacy prior to leaving office?

It does not take a skeptic to realize that timing is everything.

The big turn is here. Money cannot get out of basic industries, capital goods, basic materials and energy stocks fast enough. The really big pools of money trapped in these areas cannot buy into the next phase of the cycle until they sell. The big guys have a tough time finding buyers. You or I can sell 100, 1,000 or 10,000 shares of these big companies in a split second. Trying to find a buyer for 1,000,000 shares or 10,000,000 shares is a another story.

The big rally in the bond market means much of the money received from the sell of stocks would like to flow into bonds. A year ago, a down day in the market saw energy stocks flat and energy consumers tank. Today, big oil companies are taking yet another big hit while airlines are holding up, the group has climbed 60% in no time.

Tonight, John McCain will unleash his energy message. He will take the congress to the wood shed. He will point out the absurdity of not doing anything because it might take time to produce results. The odds are good that the price of oil will fall more than three dollars per barrel tomorrow. Gold will likely break below $800. The price of oil is down $1.50 today and Gold is down $6. The big move is in the treasury bond. The 10-year is only down in yield 4 basis points today, but this 1% move is on trillions of dollars and it is a 10% move on leverage.

If a deal with Iran is concluded, you can expect gold to be below $600, bonds below 3.5% and oil below $85 before you can say WOW! The evidence suggest we are getting close.