Sunday, May 1, 2011

Agent Speculator


This sign, reportedly located in north Central Florida, is most telling.

Please allow a moment of digression. Elements of the left wing, under the premise of assisting those in the lower levels of economic stature to purchase a home, applied pressure to banks to lend with potential charges of false racism to lend to this group of individuals. Certainly, you recall ACORN.

The easy money position taken by The Federal Reserve helped fuel and create an environment of easy lending to all levels of economic status. Coupled together, we all now know how catastrophic this series of moves was.

In response to the crash, the FED balance sheet has been expanded to allow for banks to reset. Initially, public thought was that the banks would lend this money out to the public to help restart the economy. Instead, banks have been hording the money.

Are the banks still trigger shy to lend to the small businesses and individuals that make up most of the economic growth in the community? Given the economic environment created by this administration, one which seemingly encourages people to escape their financial obligations, I would be.

Are banks not convinced of the stability of the underlying value of the collateral used to secure loans, such as real estate? I am.

Are banks saving up because they see what lies ahead in the future, which is the possibility of another crash. Could be, as a double dip recession is already underway and we can see bubbles in several areas, such as gold and silver.

If I had all the answers, I would be floating around on my Hatteras in the Bahamas.

Currently, the dollar is at near term low. One of the four pillars of Reaganomics was sound money, which includes a strong dollar, which puts our economy in prime position to function at high levels. With oil prices pegged to the dollar, a weak dollar is one of the main reasons gas prices are soaring. Another reason is the Obama administration, who set out to investigate what role speculators are having in causing prices to rise.

If I know demand is steady at a minimum and Obama is restricting oil production, adverse to increasing our domestic supply from drilling, is assisting in creating havoc in the oil rich middle east which disrupts distribution and is placing a heavy hand of regulation on the profitable energy sector, I recognize investment opportunities.

Investors are indeed speculating on higher oil costs. The way to derail the speculators is for the policies regarding oil to change, and that would heave to come from the very folks investigating potential speculation.

Recently, China has been decreasing bond purchases from the US and selling at a discounted rate, as the Chinese are not confident they will get paid what they are owed. This action devalues our economy, as does our government using quantitative easing (printing money) as stimulus.

High levels of inflation has already arrived in some areas (food), but will become an all encompassing issue in the coming years. The FED will work to quickly offset the inflationary pressure by restricting the money supply, which should include a rise in interest rates.

What will the playing field look like when this starts happening. Will the gold bubble burst. Will the much talked about municipal bond crash become a reality? Where will investors run to?

Perhaps the answer is Real Estate, a tangible investment which as adjusted has historically low prices. Due to high levels of vacant units nationwide and new home construction nil, a reset is not expected until about 2016.

If it does come full circle, I hear Exxon-Mobil is entering the home financing business. Just call me Agent Speculator!

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