-- Posted Wednesday, 23 July 2008 | Digg This Article | Source: GoldSeek.com

Rick’s Picks

Wednesday, July 23, 2008

“Phenomenally accurate forecasts” 

Yesterday’s 135-point rally in the Dow owes a debt of thanks to Hurricane Dolly, which has tacked north of oil rigs in the Gulf, reducing the threat to U.S. energy supplies. Crude oil quotes were down more than $6 at one point as result, helping to propel the broad averages moderately higher. “Moderately” is the right word here, or perhaps “disappointing,” considering the drubbing crude was getting. Perhaps it will work in the bulls’ favor, allowing stocks to build a sustainable head of steam that won’t blow out on a few back-to-back 300-point riots. Airline shares were among the biggest gainers and continue to benefit from perceptions that lower oil prices will cure much of what ails the economy. It certainly couldn’t hurt, although we’d put debt forgiveness by foreign lenders at the top of our wish list. Prices at the pump have dropped to 4.06 from a recent record of 4.11, and although a nickel-a-gallon decline is hardly reason to celebrate, it’s arguably the trend that matters and for which we can be thankful.

Tuesday’s “bad” news centered on estimates that a Fannie/Freddie bailout could ultimately cost taxpayers $25 billion or more. The financial stocks seemed to take this number in stride, possibly because it’s not much more than the banks have been writing off each quarter anyway. The “or more” part of the estimate seems likely to come into play, given the size of the GSEs’ shaky portfolios. For now, though, the bailout is being spun by Paulson et al. as a non-bailout – a “back-up plan,” if you will, should Fannie and Freddie be unable to save themselves. That they appear to be doing so, if only momentarily, owes more to the predictable ebb and flow of mass hysteria than to anything the mortgage Leviathans are doing for themselves. Let the public’s confidence in these institutions falter even slightly for a day or two, though, and any back-up plan the government can conceive of is certain to be stress-tested to the breaking point. If you are skeptical that that day will come, Paulson has a bridge he wants  to sell you.

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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2008, Rick Ackerman. All Rights Reserved. www.rickackerman.com 

-- Posted Wednesday, 23 July 2008 | Digg This Article | Source: GoldSeek.com

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