Posted by Eric Solis on December 29, 2010 under Banking, Financial Crisis, General, Global/International, U.S. Treasury Markets, Uncategorized | 
Oil Prices-Surrogate Interest Rate; Low rates are the problem not the solution.
Oil is priced more like a bond than a commodity. As interest rates go down, prices of oil rise and as interest rates go up, oil prices fall. Why is this important? Because the Federal Reserve is choosing to leave interest rates at or near zero to keep oil prices artificially high. The result of this is that money that is being funneled to OPEC could be going to the American people by way of lower gas prices at the pump, heating oil and lower consumer prices. The distribution of freed up capital as a result of lower oil prices is far reaching when prices drop. The economic benefit hits the economy immediately and is spread far and wide across all socio economic classes. Low interest rates on the other hand, unevenly distribute relief to those persons owning assets which require financing in particular BANKS. The problem is that in an economic climate where savings not debt is the required behavior; lower interest rates are a bastardized strategy towards stimulating economic growth.
Even more disconcerting is that low interest rates are essentially a vehicle for funneling money to OPEC by way of artificially high interest rates. What do I mean by this? Think about it this way. If interest rates were to increase to 5% which is the historical average for 100 years, then oil would drop back to 1990 levels. Think about a world today with $1 gas prices at the pump and natural gas bills for heating your home cut by 65%.
This would distribute 100’s of billions of dollars immediately and tangibly right into the pockets of the American people. Instead what the government is doing is keeping rates at zero; so that oil prices remain high and thereby American consumers are channeling these hundreds of billions of dollars to Saudi Arabia instead. The other benefactor to this strategy is the BANKS. Since they borrow at 0%, they are basically getting free money at the direct expense to the consumer. The consumer is getting hoodwinked into thinking that low interest rates are stimulative to the economy. But you need not be an economist to determine that the supposed tsunami of capital that the government has injected through fiscal and monetary policy, is NOT finding its way into the hands of consumers. In fact it is being sucked out of the pockets of consumers by way of an artificially high oil price. This tax on consumers is then monetized by way of printing more dollars and then loaned to banks at zero percent.
IMHO
Posted by Eric Solis on February 6, 2010 under Banking, Financial Crisis, General, Investment Strategies, Prophetic Visions, Saving & Investing, Stewardship/Spiritual/Finance, Stock Market, U.S. Treasury Markets |
Eric wrote this article while sitting at his desk in 1997, staring out the window gazing upon the San Jacinto Mountains in Indian Wells Ca. God gave Eric a vision for what was to come in the future of our country. Read with amazement the accuracy of the vision and get ahead of the curve as we are only half way through the events to come. Eric had his entire client base load up on gold at under $300 an ounce (to be stored in their homes in a safe), he steered them into commodities, had them pay off their mortgages and eliminated all credit card debt as a result of this vision. He also saw that the only way to stop this coming economic catharsis was for Americans to save more. He launched www.savedaily.com and www.save252.com in 1999 and 2005 respectively in pursuit of creating solutions to this coming disaster. fall-of-capitalism-092319971
Posted by Eric Solis on December 26, 2009 under U.S. Treasury Markets |
The US Treasury market will be the mother of all bubbles!!! We have seen the tsunami of liquidity that has flooded the world financial markets over the last couple of decades hop scotch from the stock market to the real estate market/derivative market and then to the commodity/gold market(s). But none of these bubbles are even a drop in the bucket compared to the bubble created by the Federal Reserve and Treasury over the past three years. Without going into a long diatribe with regard to the what, where, when, why and how; suffice it to say that anybody caught on the intermediate/long end of the market will be holding the equivalent to what the market calls “zero coupon bonds’ (bonds bought and extreme discounts which mature at par in the future).
If you are a greedy speculator who could give a rip about our country and want to reap profits beyond your wildest dreams, then short as many treasury bonds as you can on margin, with the opportunity to buy them back at penny’s on the dollar within the next 24 to 36 months. Make sure you can carry the trade and pay the margin expense. But rest assured, this will be a blood bath unlike anything the markets have ever seen. And people who thought they owned the safest investment in the world will learn the hard way that irresponsible fiscal and monetary policy of a government, regardless of its size can have a devastating and lethal impact on its lenders.
In the end, maybe they deserve it. How does one come to believe that a country with 12 trillion in debt should pay 0% interest on its debt??? As an old friend of mine once said…thinking so does not make it so!
Posted by Eric Solis on November 17, 2008 under Banking, Financial Crisis, General, Housing & Mortgage, Housing & Real Estate, Investment Strategies, Saving & Investing, Stewardship/Spiritual/Finance, Stock Market, U.S. Treasury Markets |
I recently appeared as the featured guest in a 10-minute segment on KTLA’s Morning News. We discussed some solutions for braving these rough economic times. Have a look at the video below …
KTLA Morning News appearance
