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Random Thoughts

July 04, 2008 – Comments (5) | RELATED TICKERS: SPY , FXF , DBC

I just posted this in my other blog but thought I would post it here.

 George

I have stated in previous posts that I have been working on my global macro picture.  I have my predictions contrary to some top level caps players that oil will push through 150 by the end of 08.  There has been a lot of lotto ticket buying lately.*(see note below), even though futures traders have been net sellers of crude oil.  I am at a point where the global financial picture is very shaky, One side of me agrees with the new CEO of coke, as he states "nobody knows what the global macro scene is going to look like in the next 6-8 months"

*(If you don't know what lotto tickets are, In the options world I refer to buying lotto tickets as buying insanely out of the money calls.  There has been a lot of actin on oil's $300 - $350 calls.)

On  China, I am with Napolen "Let China Sleep, for when she awakes she will shake the world"  And she is waking up baby... China is making up for all the ground they lost to Europe in the 1500's, when they turned their back on the world. In 1820 they represented over 30% of Global GDP where as in 1950 they represented less than 5%.  China stepping up to the table is a 25 year process that has already begun..

The Dollar will continue to get owned, over the next 5 years.... But please shut up about current account deficients.  Current account defecits are only part of a countries balance of payments.  All countries cannot run a surplus, if you think this you need some serious lesson in aritimatic... Also if you are 100% against current account defecits, get your head out of the postwar Bretton woods monetary system, things have changed..  Today capital moves across boarders pretty freely, countries can do alright running current account defecits, wheather this is smart is a different debate.  Is saving too low?  In domestic investment too low?  And last but not least, is money borrowed being used for productive investment?  Personally I pay a lot of attention to the last question.

I doubt that things are going to get better with the dollar, when FDI as a % of GDP topped out in 2000.  Shows how the world likes their greenbacks...

On Interest Rates.... Ben Bernankes hands are tied behind his back.  Tough decisions to make.  If you inflate the currency prices rising are a symptom.  You cannnot run the printing presses an not expect prices to rise.    I don't even wanna try and count the number of writers in the wall street journal who say "oil prices rising is inflation"......  Remember Sympton not a cause.....

Another Random Though on Globalization.  I was reading some Amarty Sen the other day.  She has one of the greatest explanations for globalization.

"Globalization is a result of people getting by doing what they judge to be in their best interest given the circumstances........ To Be generically against markets would be almost as odd as being generically against conversations between people.  Markets like conversation are a form of exchange, globalization is what results when the exchange crosses boarders." .....This is why I am voting McCain...

Anybody that knows me knows I am an Sowell Fanatic... Just thought I would post something he says in his book economic facts and fallacies.  It deals with the misleading concept of planning and property rights.

"What is called planning is political rhetoric is the governments suppression of other peoples plans but superimposing on them a collective plan created by 3rd parties armed with the power gov. and exempted from paying the costs these collective plans impose on others."

"City Planners, consultants all have a vested interest in the idea that people cannot live their lives as they see fit but must have their transportation and housing patterns controlled by city planners, consultants, and experts....."

Basically the real threats I see to the US is itself, the constant erosion of private property rights, and civil liberties, are making themselves in the economy....