January 15, 2008
Disgust me. So today we now have had 5 out of 10 trading days this year where the market has gone down over 200 points. Why this bothers me is, not that the market goes down or up but, the people manipulating the markets always act if if they are so surprised! I mean, the fact that retail sales went down last month has been in the news for weeks now. The fact that Citi might have to write down more assets is no surprise either. And if the other banks and financial institutions report lousy earnings and more write downs this week, would that be any surprise??? They act as if they were hit by a bolt of lightening and never saw this coming. What a bunch of crappola.
From my point of view, I'd like to see the market collapse and get it behind us, so we can go on. Some stocks are going to get so cheap again that it will be impossible to ignore. Most of our closed end funds cannot find immunity from this nonsense either but at least we can usually get paid a very nice dividend while we wait for the markets to snap back. And their dividends don't adjust so steeply. Plus we can buy more at lower prices, increasing our yields. I remember in the late 90's where no one wanted to buy REITs because they were only paying double digit dividends while buying dot com and high tech stocks could double or triple your money. So what if those companies had no earnings. Yeah, I was caught up in that mode too. Mike Kavanagh tried to tell everone who would listen, but it fell on deaf ears.
Given that we are in an election year, I'd be surprised if the Fed and the Administration don't pull out all stops to provide some kind of boost to the economy. I doubt Bush wants to leave with the country in a major recession. The Fed, if it lowers interest rates which appears more and more likely, will cause more downward pressure on the dollar. For exports, that's good news. For imports that's bad news for us. It just means that everything will probably just cost us more. But in the short term, maybe oil prices will come down some because the thinking is that there'll be less demand.
Speaking of oil, I'm sure you've heard about the Nano by now. Ta ta..... or rather TaTa Motors from India. I thought it was just wonderful that they announced the new Nano for just $2,500!!! Can you imagine ... there are estimated to be about 2.3 billion people in China and India alone! How many of them would like to own a car? I'd venture to say a lot. With it so affordable, can't you envision millions of additional cars on the roads over there. The estimate is that China alone will be adding 170 million cars on their roads between now and 2020. It's almost incomprehendsible. And every one of those cars will need gas. Gas comes from oil. Oil comes from where? Yeah, I know, out of the ground. But what I'm getting to is that there's hardly enough oil to go around right now. The easy oil has been found and pulled out. There's plenty of oil left, it's just that it's harder and harder to get to and the quality of what's being pulled out is steadily declining. Not to mention the costs associated with getting to it in the first place. Like they say "We live in interesting times".
I hope you have a good evening.
Pete Lipke
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