Some Quick Notes

Taxes on the Upper class will curtail consumption by the very folks who benefited the most from the mild wealth effect of the recent 60+% rally. Thus this will be a large factor that will weigh on any recovery we have for the foreseeable future. Large deficits will trigger either higher taxes, decreased gov’t spending or worse, a monetization of our debt. For the time being it looks like our gov’t doesn’t seem keen on being fiscally responsible in their attempts to bailout everyone. This points to a declining dollar over the longer term and less purchasing power for our middle class (higher commodity prices like oil and copper). The question is, will the populace begin to express their anger towards our elected officials following this path? Auditing the Fed would be a start.

Oil is an enigma to me.  If indeed we have conflict in the Middle East, which way would oil go?  On the bullish end you have a major supply disruption, but on the bearish side, you have massive inventory builds and a commodity that has been riding the coat-tails of a weaker dollar.  A Conflict would cause a flight to safety and thus a stronger dollar (lower commodity prices).  I really don’t know which way oil would go, but my first impulse says higher.

Finally, front page of Marketwatch (and every other major newspaper) and a topic that has taken the spotlight among cocktail conversations, gold has indeed taken the spotlight. From a contrarian perspective this is rather bearish and goes along with my thesis that we will have a large rally in the dollar sooner rather than later. Commodities and gold will have a substantial correction.

I will not be posting articles until after the December 5th weekend due to other professional commitments. Have a great Thanksgiving!!

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