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John Thomas graduated with a bachelor’s degree in biochemistry with honors and a minor in mathematics from the University of California at Los Angeles (U.C.L.A.) in 1974. He moved to Tokyo, Japan where he was employed by a medium-sized Japanese securities house. Thomas became fluent in... More
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  • Obama's Nightmare 0 comments
    Nov 8, 2009 04:56 PM | about stocks: TBT
    I know what keeps Obama awake at night. Let’s say we spend our $2 trillion in stimulus and get a couple of quarters of weak growth. Then once the effects of the stimulus wear off, we slip back into a deep recession, setting up a classic “W.” Unemployment never does stop climbing. This happened to Roosevelt in the thirties. So congress passes another $2 trillion reflationary budget. Everybody gets wonderful new mass transit upgrades, alternative energy infrastructure, and bridges to nowhere. But with $4 trillion in spending packed into two years, inflation really takes off. The bond market collapses, the dollar tanks big time, gold goes ballistic to $5,000, and silver explodes to $50. Ben Bernanke has no choice but to engineer an interest rate spike, taking the Fed funds rate up to a Volkeresque 18%. Housing, having never recovered, drops by half again. This all happens in the 2012 election year. Obama is burned in effigy, a Mormon is elected president, and the Republicans, reinvigorated by new leadership, retake both houses of congress. We invade Iran. Crude hits $500. This is not exactly a low probability scenario. Remember Jimmy Carter? This is why junk bond yields are still stubbornly high at 12.5%, and credit default swaps live at lofty levels. Are the equity markets pricing in this possibility? No chance. The risk of Armageddon is still out there. Personally, I give it a one in three chance. Pass the Xanax.
    Stocks: TBT
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