Tuesday, July 10, 2007

Late in the Day

Given what the comptroller general David Walker has said about the problems with the social safety net in the U.S. I was thinking to myself, are U.S. treasuries with their current AAA rating all they are cracked up to be? With helicopter Ben at the helm of Fed, its a bull market in lubricant for the printing presses and a bear market for the glut of dollars legal tender and counterfeit. The depreciation of the dollar is inevitable and while I don't subscribe to all their beliefs, I sure can understand the arguments of the gold (hard money) advocates and their sound money mantra.

I am of the belief that a well considered portfolio of bonds of physical commodity producers (with assets in canon law domains) may in fact offer more security as they would have inherent inflation protection that U$ denominated U.S. treasuries wouldn't(TIPS do of course) Taking this concept a step further the bonds of, in particular, oil and gas, coal, and precious metals producers would offer secure income based on their expected rising cash flows and the added positive market psychology that physical assets should offer.

Home Depot - smoke and mirrors, nothing more. The share buyback is a gift, use it as an opportunity to get out. The housing debacle and yes it is a debacle is in the early innings.There is so much resistance around $45 why wait you can always come back and buy it thru that level and remind me how wrong I was!

Just in case some of you think I am a raving lunatic perma-bear. Quite the contrary. I think we are headed for a similar scenario to the 70's only worse to the exponent 10 due to the low savings, high debt, eroded manufacturing base, decrepit fiscal position of local, state and federal governments. Basically if you think roads, sewers and public works are in shoddy shape now, just wait a few years. You will look back on today and consider it the good ol' days. I wish I had better news for you but when you try to manipulate the economic cycle which is exactly what the Maestro (Greenspan) did after the tech bubble, you don't fix, rather you exacerbate the problem and make it exponentially worse. You need to protect yourself, not withstanding a good shotgun and pistol but financially also. This is a commodity bull market we are in, and just like the paper (financial) bull market we just completed, this one will last a long time. Jim Rogers (George Soros former partner) believes we are in the early innings of the commodity game.

So if it comes out of the ground, consider owning it. So yes, I am a raving bull.

Just after the close today as I finish this piece Moodys is beating S&P to the punch and downgrading a pile of sub prime slime to below investment grade which may now force institutions to sell as they cannot hold paper rated below investment grade. ed. note when I originally typed S&P I type $ instead of & which is appropo for them considering their ratings on the crap was bought and paid for by the Wall St. brokers to be repacked. They should all be charged under RECO.

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