• Home
• Investment Strategies
• Specialized Investment
• Real Estate & Retirement
• About MHP

Where do we go from here?

July 8, 2008

Mark on the markets Mark Patterson


Where do we go from here?

A couple of months ago, much of the media that covers the financials, Chairman Bernanke and the Fed proclaimed that the worst of the credit crisis was over. It appeared that we had come off our lows and the stock market was off to the races on our way to another bull market. The Dow Jones was around 13,000 again, and could not possibly go back to test or break through the lows that we experienced in the last 8 months, after all the Fed had once again saved us from financial disaster. Everyone who was losing their homes to foreclosure was saved, and the media spotlighted the arrest and jailing of some really bad hedge fund guys from Bear Sterns that created all the pain and anguish over our foreclosures for us in the first place. All was right in the world again.
But then, the hedge fund guys that were not jailed in the mortgage debacle decided that they could find a new way to cause pain to us all. They started to speculate in the crude oil markets. They threw away the laws of supply and demand and with the help of the big oil company’s, ran oil up to $145 a barrel. Those hedge funds got us again.
Politicians called for windfall taxes on big oil companies and to do away with speculators in the oil commodity pits. That sounds like those politicians really care about us, but I wonder if they ever thought about handing the price of oil over to OPEC and other oil exporting countries, and out of the hands of the free market via the commodity pits? I wonder if those politicians ever studied economics and one of the major causes of the great depression, known as tariffs or taxes on trade.
I think it is interesting that the ECB, that is like the Fed except in Europe, just raised interest rates to quell inflation, even though the economy is slowing over there as well. The Euro is strong, the Dollar is weak. The ECB keeps there eye on inflation, letting the economy work through its cycles. Our Fed lowers rates, because that is what we expect in this country, thus creating inflation, high oil prices and a very weak currency.
As I wrote in the spring, we will have a rough summer in the markets and bear markets can be long and drawn out before there is a sign of a meaningful recovery. Review your investment portfolio, make sure you are properly diversified and don’t be afraid of holding a high level of cash in these tough times.
Mark Patterson is a registered investment advisor with MHP Asset Management LLC, and can be reached at 447-1978 or Mark@MHP-Asset.com