jorloskawitz

Fiscal Policy: What's the Null Hypothesis?

The further misapplication is assuming that these decisions are not cumulative. In our judicial system, once a person is convicted, he or she is largely put away for the term of sentencing. In an economy, these decisions present themselves relatively frequently. That might sound like a good thing, since it means any action can be "reversed", but a reasonable implication of the author's thesis is that more often than not action will be taken to "do something"--something inflationary and deficit increasing. That might seem better than the alternative in a one-off depression or recovery scenario, but it ignores the bigger forest which is a constantly expanding money supply and an exponentially accumulating deficit. If that's not a risk worth avoiding, I'm not sure what is.

Why Shorting the Market Makes Sense Above 980

"So the trade is to short USO if oil reaches the $72-$75 range. Remember that credit markets didn't destroy General Motors (GM). It was brought down by $140/barrel oil. "

You argue that high oil prices dampen economic activity which in turn will stem bullish oil. That makes sense if the cause of the initial rise is caused by economic activity. But, if the rise is primarily due to inflation, then the prices are only limited by inflationary expectations and excess liquidity. Those could drive the price of oil much higher than 72-75 (think over 100). Further, since there's obviously a good deal of money on the sidelines right now, and people continue to think commodities and particularly energy commodities are safe bets--not to mention inflation heding plays--you might not see the price of oil come down until the rest of the economy comes with it. I'd look for a brief pull-back between 60-80 and then continued sailing into the 120s by next fall. If the world economy is still standing by January, I don't think oil will have gone below 100, and I think it will stay there for months.