War on Savings
Research for Online Investors

by John Dalt

10/7/10

Crude oil has been on a tear for the last two weeks.  You should brace for gasoline prices at the pump to move higher.  The USO (U.S. crude oil) etf is up 12.7% since 9/23.  Crude oil is lower this morning, but where is it headed?

Why has crude oil had the run-up in price?  A quick check of inventory shows there is no shortage.

The red line depicts current inventory plotted against the average inventory range represented by the wide blue swath.  That red line looks like it is headed in the wrong direction!  Our inventories are building…there is no shortage.  Why is the price going UP?

Yesterday I went to lunch with a subscriber.  We talked about the stock market.  He is scared of the market (2008 did that to a lot of investors).  We talked about what to do with the savings him and his wife have accumulated.  He owns CDs and Money Markets through the local bank.  I told him the 2% interest he was earning was killing him.  The chart below shows why.

The U.S. dollar has lost 12.6% since June 4, 2010.  What will the $1020 be worth our subscriber/friend gets back on his $1000 in savings?  He has lost 12.6% in purchasing power the last four months!

And now you know why crude oil is going up.  His wife will go to the convenience store, and pay 13% more for gasoline while the bank pays 2% (annually) on his savings.  This is the design, this is the plan, this is the upsetting part of what our government and Federal Reserve is doing.

They are deftly stealing money from every saver’s bank account, without stealing your identity and account numbers.  You know the really sad thing to me?  Most savers in the U.S. are our elderly citizens who depend on their savings for their ‘golden years.’

The ‘golden years’ are going to look a lot different when people realize the money they have in CDs and money market accounts won’t buy their everyday needs.

Is it planned?  Absolutely.  Bernanke, Obama, congress and the bankers know exactly what is happening and what the result will be.  If you are not invested in equities or commodities that will appreciate from inflation of the money supply, you will lose.  We might suggest a subscription to our Buy, Sell, Hold covered call service.  We sell calls against our 10 stock positions for 'protection' again and again for income.  Every month it seems we sell one of our positions for 10%, or more.

Right now, the do-dads from China have not increased in price, because the Yuan is tied to the U.S. dollar.  Our congress and Turbo Tim Geithner are working on that.  As we have written the last few days, pressure is building for China to raise the value of their currency.

If they are successful, you will have heartburn at the gas station, and sticker shock on every trip to other stores.  Natural resource prices higher, imported finished goods higher, there will be no refuge.  Computers, appliances, home entertainment, plastic trash bags, all will cost more.

To the Mailbag:
I really enjoyed today’s MarketToday because of your reference to Euro Pacific, the explanation of the China/Nobel prize issue, and, I particularly appreciate the Reagan quote because it was and is so true! –gulch member L.

John’s reply:  I try to bring us information to understand the economic situation affecting the markets.  To be good citizens, and able to profit in stocks we must understand the politics and economics that change the sand under our feet.  Sadly, the apologists for Obama will not listen, nor appreciate the warnings from champions of freedom such as Ronald Reagan.

Quote:
We don't have to be smarter than the rest. We have to be more disciplined than the rest. -Warren Buffett

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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