Chicago Trader Rant

You've got to check this out! Rick Santelli, a Chicago Trader on the floor of the Merch, says exactly what I'm feeling.
http://www.youtube.com/watch?v=bEZB4taSEoA

Growing up in a commodity trading house (unusual upbringing, I know) I hold a special place in my heart for Chicago traders. These people speak my language. They know, because they deal with it constantly, that markets can and will go down. They know that if you get caught on the wrong side of a violent trade that you can lose everything. They also know that when someone loses everything, that the government isn't coming to the rescue.

So the stock market is down hard- SO WHAT!!! Caveat Emptor! Let the buyer beware! This is the basis of our property law in America. If we are now saying that the buyer does not have to beware, then the system is finished. There is no way to protect every one's downside market risk.

It may be sad to watch families lose their houses. It may mean that for a while all of our houses are worth less. It may mean that banks fail (have you pulled any cash out lately?). But this is a natural occurrence. Just like a wildfire (maybe a Texas Wildire!) the dead brush is consumed and the new ground is more fertile. So let it burn.

In the meantime we are hearing about deflation on one side and hyper-inflation on the other. It can't be both. But this wide gap shows that people are confused and in a panic. Why? Let's look at Germany. Germany is the strongest economic entity in the EU. Germany attempted to sell $6 Billion in bonds a few weeks ago and couldn't get it fully subscribed, so their fed printed the money to fund the last $1 Billion. Why does this matter? Because the new Obama stimulus plan will require the U.S. to auction $100 Billion almost twice a month. The biggest subscription we have ever held was $60 Billion. And do you know what happens if they go under-subscribed? We print money to make up the difference. This could led to hyper-inflation.

My favorite trade right now? Sell the dollar and buy oil. It is a one year spread that will do best in inflationary markets. And inflation scares me much more than deflation today.