NUTS! Staying The Course

Even before the debt deal got to the president for signature, it was already so old news that the market was selling off on the next worry in line. I mean come on, we all knew it was just not imaginable for a government to trigger a new recession willingly and it’s not like it needs to since the economy seems to be heading that way anyway! No shortage of worries to short the market, it’s a shame I am not a day trader.

Bastogne-General-McAuliffe-560If you’ve been a reader of this blog, you probably got used to my WW2 military tidbits that surface in my posts. Back in December of 1944 during the German Ardennes offensive, the US 101st airborne was encircled in the town of Bastogne. It was not long before a German delegation delivered an ultimatum to the US commander, Anthony McAuliffe, requesting the surrender of Bastogne or else. General McAuliffe scribbled “NUTS!” on a piece of paper and sent it back to the German commander. What followed were several failed attempts to capture the town by the Germans as they attacked only from one direction at a time. This gave the US paratroops the chance to mass their defense at each point of contact successfully until they subsequently got relieved by an allied counterattack.

Around the same time last year, the markets looked hopeless just like today, they sold off and investors were staring into the abyss. Yet, they turned around and produced fantastic returns by the end of the year.  It was General Ben’s QE2 counterattack that saved the day. Last year, I scribbled “NUTS!” on my paper and sent it back to General Market when he asked for my surrender. In hindsight, it was the right thing to do.

Which brings us to this year, is this all déjà-vu? Is August really the best time to be a buyer instead of a seller? The major indexes have all crossed below key technical price levels indicating further losses ahead. Mr. Market’s delegation is at my door step yet again requesting my capitulation. With a miserable US GDP growth at 1.3%, there’s a good reason to raise the white flag. The recovery is painfully slow and new jobs are hard to come by.

Let’s face it, with all the debt issues in North America and Europe, investors are staring at a lost decade ahead. Sure, the debt ceiling was raised but the deal didn’t satisfy everybody and I sure hope the politicians didn’t plan their savings on highly optimistic GDP growth targets. But wait a minute; have you noticed that all we do is discuss the US economy? Whatever happened to the Chinese and Indians among other emerging economies? Is their 9%+ GDP growth they are on track to achieve this year not worthy of mention? Why are we turning our backs to millions of people ascending to middle class status?

From my petroleum perspective, the global fundamentals of supply and demand underlying oil are still strong. Oil prices are drifting lower and it is a good thing as long as they settle above $80, a fantastic price level for my junior producers and for the US economy. In my opinion, there’s no stopping global growth, there’s no stopping the new emerging middle class in BRIC countries.

Mr. Market is still waiting for my reply; his delegation is at my doorstep. While I might “evacuate” a portion of my troops from the cauldron, an outright surrender would be NUTS! So here’s my reply; take this paper back to your commanding officer….