Monday, August 11, 2008

Economic Shakedown Possible!

Ok, what I'm waiting for is a margin call in the commodities market. That aside, the market is fixing itself.

Now that the summer driving season is coming to an end, oil prices are dropping.

I would say there's about a 75% chance that ONE of the following will happen (assuming no war, natural disasters, etc.):

Option 1) We'll see a slight increase in oil prices toward the middle of the month in an attempt at an empty market correction. After this, the bottom will fall out of the oil market, the bubble will pop (some think this is already happening), speculators will panic, and the price will go WAY down. Sure it will come back up next summer but will be nowhere NEAR $4 a gallon. Probably less than $3.

Option 2) We MAY see a slight increase in oil prices toward the middle of the month in an attempt at an empty market correction. After this, the oil prices will drop again but the dropping will lose some momentum as we realize that the prices aren't ALL because of speculation. Next summer's driving season will see prices near $4 a gallon but won't get up there again.

Of course, nobody can see the future, and it's very possible that the truth will be somewhere in the middle.

Here's the problem. A big part of why oil is dropping as fast as it is dropping is because we've made adjustments. What happens if we have $2.50 gas? Will we go back to being gas hogs? Will it pretty much put an end to the "green" movement? If so, we'll be back here in a couple of years.

If the botom falls out of the oil market, will we start seeing prices of other items going back down? Or will they stay where they are? That is, if option 1 comes to fruition, we'll go from stagflation to potential severe inflation, thus actually WORSENING our economic situation!

Be careful America. We're walking some very fine lines here, economically.

OBTW, if you have more than $100,000 in any single bank account, split it up! And don't forget about interest. If you have any more than $80k or so, I'd start splitting. I don't think we've seen the end of the bank problems.

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