Tuesday, 30 October 2007

Easy Money - *Edited

Before I go any further let me please explain that I am not an investment professional, have never been, hold no licenses to act as such, apart from several courses in college have no formal financial training, etc. So if either of you want to act on ideas presented here, please do so at your own risk. With that out of the way…

The next couple of days could get rather nasty for the markets. The Fed is meeting to decide whether to lower interest rates. During these meetings, new data on housing (bad) and consumer confidence (just as bad) has come out. The markets are trading net down on this news, but if you read between the lines a little bit, it’s clear that the market has already priced in the good news that the bad news brings (the Fed will fly in on their white horse with rate cuts) which is buoying the markets from the straight effect of the bad news about housing and confidence. Still with me? So if the Fed cuts rates this time, I don’t believe we will see a big bounce like we’ve seen previously: rather, I think we’ll see the market trending flat. That said, the market has sort of astounded recently with its ability to shrug off bad news and drive shares up, so who knows?

Now, the elephant in the room is inflation. And this is where Ben Stein comes famously back into the picture. Not as himself, of course, but as the teacher from Ferris Bueller. Anyone remember stagflation? Inflation in a stagnant economy. Oil is just about ready to go over $100/barrel. Everyone was freaking out when it went over $70, everyone was freaking out when it went over $80. It went over $90 without anyone noticing and currently sits in the low $90s. There is supply trouble in Mexico and of course that messy little patch over in the Middle East. Oil goes up, pretty much everything goes up. But the rate cuts are needed in order to keep goosing whatever growth out of the economy. Lower rates will yield inflation, which when combined with the higher price of oil could spell BAD inflation. You can’t invest money because it offers a terrible return and large risk. You can’t stuff it in a mattress because inflation will make quick work of that. So what do you do? Precious metals and energy services. I’ve said it before and I’ll say it again.

The mountain bike got stripped down last night. I haven’t ridden or paid much attention to it in a long time, and it’s a good thing I dealt with it before trying to ride it. The stock bb and cranks, never very good in the first place, each have a foot in the grave. I knew the rear wheel was trashed but didn’t have any clue how trashed it was until I took a really good look. The front derailleur is one of those e-type ones, which I don’t understand because it’s a hard tail, so why use one of those? Well, it doesn’t work too well but fortunately front derailleurs are cheap. Fortunately I get to make a team order soon, and the fork that I’d gotten long ago is going to work like a dream once I install the headset spacers. I’m getting all psyched up to get dirty, maybe even strap on the lights and get out after work some.

Boring week for training is being matched by boring week at work. Mania has temporarily given way to not a whole lot of anything going on while we wait for a permit to get sorted out. Mania will be back soon enough.

* - I found a brother in arms today. Click on the "Clusterf**k Nation" link. I think the guy is famous, but whatever, he is on target with a lot of the stuff I'm thinking and writing about. Like today's post.


Kyle Jones said...

I hope you are right on them bringing down the interest rates. My wife and I are seriously looking at houses right now. We are happy the housing market has cooled and with the added interest drop it will really be in our favor to buy.

Chuck Wagon said...

I think the softness in the housing market is going to continue to do more for you than interest rates. You can always refinance an interest rate later, but once you've bought the house you can't renogotiate the purchase price.