America is Broken and the World Economy will suffer. The Federal Reserve in their infinite wisdom (these guys are almost as smart as the monoline insurance* companies) dropped the cash rate 75bps on Black Tuesday (22nd Jan) and that didn't even stop the rot. Now that they have telegraphed another 50bps cut, we're going to see what happens when the cash rate is less than inflation. There's no incentive to save money because money in the bank is devaluing quicker than any yield you're getting on it. So the Fed is betting that once again America will be able to spend their way out of trouble. This sounds good, but when people are pessimistic from years of war (I can't even remember a time before Bush War Snr and Bush War Jnr) and falling asset prices (Houses, Shares and Money) then they're not going to be in a spending mood. This is going to sting for a while. The fed should have done what we all did on Tuesday, sucked it up. You can't keep shielding people from being hurt or they'll never learn Bernanke you Goose.
*these guys are insurance only in the sense that they're happy to receive your premium payments while the sun is shining but as soon as the storm clouds gather they are downgraded and aren't good for their AAA rating.
Friday, January 18, 2008
I am still bullish Uranium, there are a lot of reactors being built and not a lot of extra Uranium being dug up. PDN.AX has been getting hammered as has the rest of the Aussie Market. There's potentially a blockbuster trade out there for the brave investor. PDNKZC (listed mini) has a $5.22 stop loss and a $4.96 strike. PDN is trading around 5.35 at the moment, if you get long here and don't get stopped out, you'll be laughing when PDN bounces back above $7. At $7, this mini is about $2, so you'll make 5 times your money with only about 10% if you get stopped out....how brave are you?
Thursday, January 17, 2008
With CitiGroup writing down anything they can get their hands on, the long predicted fallout of the 'Sub Prime' Meltdown is starting to be felt. Is this the end of the world? No, but it does mean that the Dow is much more likely to see sub 12,000 levels than back at 14,000 any time soon. It seems to me that Bernanke will be quick on the draw should the American economy start turning further south and this should give us a little bit of short term relief from the sky falling in. I wouldn't want to be long the market with the current irrational selling. There is however a good opportunity for long term Aussie investors to get long at these levels. Quality companies like NAB, at $35 is a bargain, Zinifex at $10 is cheap as chips and I also like Iron Ore in the short term with price negotiations currently taking place. MMX looks really good at less than $3.