The Coming Bust in the Oil and Commodities Market...and the Political Market
We've already seen sharp spikes and dips in the price of oil, as well as the price of gold and other commodities, lately. Expect the smart money to keep selling while the dumb money keeps buying. Oil, gold, and other commodities are no different from any other investment vehicle. Basic economics applies to them, as well, which is why the governor's unrealistic revenue estimates of $8 natural gas is even worse than it first appears.
People have a herd mentality when it comes to markets. When things are up they want to buy and when things are down they want to sell, which is exactly the opposite of what they should do. A few years ago it was tech stocks. Everybody wanted them, then nobody wanted them. More recently, it's been real estate. Everybody wanted it, then supply and demand caught up and it's slowed tremendously.
Right now, we're in the middle of a rush for oil and other commodities, and a consequent rush away from the dollar. I have friends who are just mad about gold. It's a hedge against a weak dollar. They're so excited about buying it because it's up so much, lately. I've cautioned them that that's exactly why they ought not buy it. Lately, it's started to wobble a bit.
An important question one might ask is, since gold is traditionally viewed as an inflation guard, why would the people selling it want to sell it for dollars? If they really think the dollar is going to continue to deteriorate as their slick marketing portends, then they shouldn't want to trade their valuable commodity for it, right? The truth is that gold is like every other investment vehicle. It rises and falls, as do paper assets, real estate, currencies, and political fortunes.
All of this panic is just that. That being the case, cool heads should realize that what is now will not be tomorrow.
Political prognostications are the same way. Last year, John McCain was DOA politically. Now, he's the Republican nominee. Three months ago, there was no way Mike Huckabee could lose. Now, he's fallen off the face of the Earth. A month ago, Barack Obama was about to be crowned king of the universe. Now, he's in a tailspin. I could go on, but the point is not to buy into hype, in markets or politics. Everybody thinks what's happening now is what will happen in the future.
The same goes for Governor Beebe and democrats in Arkansas. They're on top of the world because the state has been a bull market for democrats lately. But it will change. The important thing is that Republicans are ready to capitalize when the market changes. Bull markets make superstars of mediocre talent, as a friend likes to say. Right now that's true for democrats. The governor can't help but be successful because he inherited a strong economy. As we go into a possible downward cycle, we'll see how much of his success is good business acumen and how much is just dumb luck. I'm leaning heavily toward the latter since his first response in a slowing economy is to take capital out of the marketplace. To be sure, he's a first rate politician, but that doesn't mean he's a first rate manager. Getting elected and running a government are two different things entirely.
Keep this in mind, Repubs: what goes up must come down. Now is the time to prepare, to gird yourselves for battle. You don't want to be caught scrounging for crumbs at the democrat table when the market turns. Things can turn on a dime in the political marketplace. What's more important is that we can turn the market. We have to offer an obvious choice, though. We can't just be imitation democrats.
One final truth is that people who don't tie their fortunes to the whims of markets, political or financial, succeed year in and year out. Their success is based on sound practices, not betting or hedging. That's exactly what we must base our success on. Now is the time. If not now, when? If not us, who?
People have a herd mentality when it comes to markets. When things are up they want to buy and when things are down they want to sell, which is exactly the opposite of what they should do. A few years ago it was tech stocks. Everybody wanted them, then nobody wanted them. More recently, it's been real estate. Everybody wanted it, then supply and demand caught up and it's slowed tremendously.
Right now, we're in the middle of a rush for oil and other commodities, and a consequent rush away from the dollar. I have friends who are just mad about gold. It's a hedge against a weak dollar. They're so excited about buying it because it's up so much, lately. I've cautioned them that that's exactly why they ought not buy it. Lately, it's started to wobble a bit.
An important question one might ask is, since gold is traditionally viewed as an inflation guard, why would the people selling it want to sell it for dollars? If they really think the dollar is going to continue to deteriorate as their slick marketing portends, then they shouldn't want to trade their valuable commodity for it, right? The truth is that gold is like every other investment vehicle. It rises and falls, as do paper assets, real estate, currencies, and political fortunes.
All of this panic is just that. That being the case, cool heads should realize that what is now will not be tomorrow.
Political prognostications are the same way. Last year, John McCain was DOA politically. Now, he's the Republican nominee. Three months ago, there was no way Mike Huckabee could lose. Now, he's fallen off the face of the Earth. A month ago, Barack Obama was about to be crowned king of the universe. Now, he's in a tailspin. I could go on, but the point is not to buy into hype, in markets or politics. Everybody thinks what's happening now is what will happen in the future.
The same goes for Governor Beebe and democrats in Arkansas. They're on top of the world because the state has been a bull market for democrats lately. But it will change. The important thing is that Republicans are ready to capitalize when the market changes. Bull markets make superstars of mediocre talent, as a friend likes to say. Right now that's true for democrats. The governor can't help but be successful because he inherited a strong economy. As we go into a possible downward cycle, we'll see how much of his success is good business acumen and how much is just dumb luck. I'm leaning heavily toward the latter since his first response in a slowing economy is to take capital out of the marketplace. To be sure, he's a first rate politician, but that doesn't mean he's a first rate manager. Getting elected and running a government are two different things entirely.
Keep this in mind, Repubs: what goes up must come down. Now is the time to prepare, to gird yourselves for battle. You don't want to be caught scrounging for crumbs at the democrat table when the market turns. Things can turn on a dime in the political marketplace. What's more important is that we can turn the market. We have to offer an obvious choice, though. We can't just be imitation democrats.
One final truth is that people who don't tie their fortunes to the whims of markets, political or financial, succeed year in and year out. Their success is based on sound practices, not betting or hedging. That's exactly what we must base our success on. Now is the time. If not now, when? If not us, who?
posted by Henry Rearden at
12:56 PM
0 Comments:
Post a Comment
<< Home