"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey

Buy and Hold: I Don't Think So!

I'm am not going to bore you with the release of every economic report since I am more interested in the big picture trend, and not the weekly gyrations that get revised up or down.

The trends are very clear, and the economic conditions remain treacherous.

This being said, I believe the market is poised for a tradable rally starting as early July, and ending by late summer. The main catalyst for the upcoming rally will likely be spurred by a sell-off in energy and commodity prices.

The Bush Administration will throw voters a bone by temporarily halting new oil purchases for the Strategic Petroleum Reserves. Oil speculators who have driven oil futures well beyond normal supply and demand pricing will be anxious to take profits and wait for better buying opportunities.

The US dollar will magically find support, and short sellers will cover adding more fuel to the sell-off in energy.

Gold and commodity prices will take their cue from a stronger dollar, and a weakening economy and correct as well.

The major integrated oils will come under increasing pressure from politicians, and the oil trade after the November elections will be oil futures and ETF's that trade the commodity, and not the oil company.

For now, I am comfortable with our Oil & Gas short position- Ultrashort Oil & Gas Proshares- DUG which we bought on Tuesday at a price of $27.85. The current price is $28.78, +3.33%.

As we head into late July, I will be interested in buying commodity related oil ETF's such as;

United States Oil (USO): spot price of West Texas Intermediate (WTI) light, sweet crude oil.

MACROshares Oil Up Tradeable Shares (UCR): Same

PowerShares DB Oil (DBO): tracks excess returns of futures contracts on Light Sweet Crude Oil (WTI).

Assuming a democratic victory in November, I can envision a similar scenario to the 1970's when oil companies were punished (so was the consumer) with a windfall profits tax, and crude prices skyrocketed.

If John McCain happens to win the presidential election, crude will continue to do well, but the major integrated oils may be spared from a WFP tax.

Any rally in the broad market has to be viewed as a rally within a bear market. Clearly inflation is a major problem that must be dealt with.

Yesterday, the dollar rose to the highest level in more than a week after Fed Governor Fisher said the central bank will raise interest rates if inflation persists.

Well inflation remains a major problem, and we saw some of the effects after Dow Chemical (DOW) announced they would increase prices across the board by +20%.

Dow is not the only ones raising prices. Many companies have done the same, and many more will follow. But here is the good news. Once inflation subsides, companies who substantially raised their prices will not lower those prices in the years ahead. So, as their costs decline, their prices will remain elevated ensuring massive profits in the years ahead.

As far as the 2,3,and 4% inflation numbers are concerned, you can see that they are nothing more than manipulated lies.

The other lies to the public are the constant, and ridicules reasons why energy prices spike everyday. I am so sick of hearing about Nigerian violence as an excuse. This is absurd! It reminds me of the day VP Cheney suggested that we (you & me) go out and buy plastic and duct tape for our windows to protect us from Saddam’s weapons of mass destruction.

You do remember that don't you? How absurd is this?

I happened to be shopping a Lowe's a few days later, and I asked one of the associates if anyone actually came in and bought duct tape. He said, oh yes, they were sold out.

I haven't heard a story this good since I read my son "Chicken Little" ten years ago.

Interest Rates

Don't get sucked into thinking interest rates are going to stay down for a prolonged period of time.

With massive inflation and a dollar that is worth less than a decent size Hershey's bar, interest rates must go up.

Here's the scoop on our dollar. Go overseas and see what they will give you for it.

1 US Dollar= .504 cents in British Pounds
1 US Dollar= .991 cents Canadian (and they call the Canadian currency "Loonie"?)
1 US Dollar= .639 cents to the Euro

See what I'm getting at here? This is not the currency of the greatest country in the world.

Interest rates will rise or the currency will collapse.

Former Federal Reserve Chairman Paul Volcker said the modern financial system has ``failed the test'' of the marketplace. When asked whether he predicts a ``dollar crisis,'' he said, ``you don't have to predict it, you're in it.''