Oil, Gold and StocksAugust 17, 2008
Mark on the markets Mark Patterson
Oil, Gold and stocks
Over the last couple of weeks we have seen oil retreat $25 dollars per barrel. We have seen gold come down over $100.00 per ounce, and the U.S dollar strengthens against the Euro and other currencies. In reaction to all this good news we have seen stocks rally 500 points to the upside.
It seems as though this is good news, but the problem with the weakness in commodities and strength in the dollar really is that it created a minor stock market rally into a very weak economy that still has some major problems in the credit markets. As I have stated before, we will have rallies in a bear market. However I strongly believe this is not the start of a new bull market in stocks yet. My belief is that the recent weakness in commodities really represents a global contraction, and from a relative value the U.S. economy maybe looked as though it was farther along in the bear market than the rest of the world, and the U.S. would exit the global recession before the rest of the world. It is a good theory, however I believe the U.S. has a long way to go to work through these credit issues that are creating big problems for our economy.
Unemployment is up and initial claims for unemployment are up. I am concerned that the unemployment numbers are just a leading indicator of some more pain to come. Inflation will probably start to come down if energy prices continue to pull back, but if we are not working and have no equity in our homes, spending will slow more than it already has, and hurt the economy even more.
If a new tax policy is initiated by our new president is November, and it is geared towards a more socialist model rather than capitalist model, i.e., tax the rich and give to the poor, I can see risk capital retreating from our capital markets very quickly. Those “rich people” that create jobs, will not invest the capital if they must give a high percentage to the government in taxes. This would not be good for anyone except those who expect to be taken care of by the government, “the entitled”.
Mark Patterson is a registered investment advisor and commodity trading advisor with MHP Asset Management LLC, and can be reached at 447-1978 or Mark@MHP-Asset.com
MHP Asset Management, LLC
P.O. Box 460, Conway, NH 03818
Phone: 603-447-1979 Fax: 603-941-0904 |
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