July 20, 2008

Current Economic Thoughts

So lately I've been listening to the Fed brow beat the world into thinking they are going to increase interest rates. I personally have a hard time believing that considering how weak the banking sector is, it seems as though many banks are a stone throw from insolvency. I guess that is the problem with taking on too much debt and using leverage to the degree they have. I have yet to understand why the Fed lowered the rates so quickly at the beginning of the year. Now they have committed a lot and need to pull back and it will come at the cost of credibility and likely a mild depression or continued recession.

Oil is down a bit from it's highs but with trouble brewing between Iran and Israel we are a day away from record high prices. That said I don't think our oil issues are going away anytime soon. Hopefully, they will continue to slowly erode over the next few weeks but unfortunately I won't be betting on that.

Went to church today and you know you are in economic hard times when someone has stolen the condensers out of the AC units to melt down and sell the copper. It was awfully warm and we got a taste of what life was like for the pioneers when they came into this valley albeit we are still a lot better off.

I really have been betting against the dollar lately but am getting more and more nervous to. I can't believe the fed will let the dollar continue to sink. I personally don't think they will raise rates but I do think they will convince the G8 to do a dollar intervention and buoy the dollar up which would further reduce oil costs, since oil is priced in dollars, and give the Fed more time on increasing the interest rates or allow them to raise them at a much more minimal controlled pace. Right now I'm focusing on taking just a few points a trade and trying not to hold trades very long.

Well hopefully everyone is having a good summer.

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