Surest Casino to make money from now till Presidential Elections of 2008

It doesn’t matter if you were a Republican or a Democrat, your priority should be to make money for yourself. No one could become wealthy by being naïve. True, some people become rich by being at the right place at the right time, often being clueless as to how they became so wealthy. For example, if you were lucky to have become an employee, with stock options, of a company that went public at the right time, you would be a multimillionaire by now. Under those circumstances, you may not even have any clue as to what really happened, while everybody around you thinks that you are a genius. That is the power of the public stock market and if given the opportunity you should do the same.

For the rest who were not that lucky, here is my guess (based on observing trends but not based on any fundamental facts) as to something that you can look to increase your wealth from now till the 2008 presidential elections:

The Republican controlled Federal Reserve Board with the help of Republican controlled media will do all in its power to keep the stock markets up until the elections in 2008 because, I think, this is the major index they use to measure how strong the economy is. In a way they are right, if you equated economic strength to paper wealth (which I think is a false premise), because most of the pension funds and retirement fund money are in the market. (They badly want another a republican administration so they can have another 8 years of welfare for the richest on earth. Considering the amount of wealth they have made thanks to the taxpayers in the last 8 years, another 8 years could make them invincible—more power to you if you can participate in that because that is absolutely the easiest way—to use Machiavellian logic). With upside so huge, according to my calculations, they will do all in their power to hang on to power. And running the markets higher till the elections would be considered a priority. So they will:

1. Create money and dumping off helicopters if necessary.

2. Grant huge government contracts to large corporations, with tax money and borrowing the balance, so there will be increased revenue and increased GDP (another one of those useless indices) to show that we are still growing.

3. Have a parade of pundits in the media saying nothing but good news about the economy sharing banter as opposed to having bitter opposite viewpoints and with the host patting all who thus agree on the back with the compliment: "The Great American".

Every smart gambler and speculator knows this predictable behavior and will be in the US stock market to cash out big. As to the financial outlook in the next few quarters, corporations have so much cash that they will buy back significant number of shares, so you can expect earnings per shares to beat expectations. Then at each one of those surprise-EPS announcements, you can expect the markets to run 200 points plus a day, while on business news channels all the commentators marvel at the resilience of the US economy.

In order for you to participate in this gambling environment you should read some good books on how to trade, arbitrage and also how to hedge your bets. You have to learn to hedge because even under the careful eye of the Federal Reserve some people lose faith and start dumping stocks in panic. So there will be wild swings. This has been the common occurrence in all the bubbles in history going all the way back to John Law’s France and Mississippi scheme (read about it in Google). So be very careful.

I personally believe that stock market is the place to be. When it comes to real estate, only the ultra expensive markets (over $20 million homes) will still be safe since those guys have more money than they don’t know what to do with. But the middle class and low income housing, I don’t think will have another bubble, because none of the people in those socioeconomic groups have any money. Do not expect this newly created wealth to trickle down to them since the middleclass wages will remain stagnated, as it has been since the 1980s and those groups are in debt to their eyeballs so don’t believe they can borrow any more either.

As far as the currency is concerned dollar will continue to go down. It does not mean you should short the dollar because the rest of the world depending on the US markets to buy their products cannot afford to have their currencies appreciate against the dollar so they will also print huge amounts of their currencies to support the declining dollar. You can expect all the printing machines around the globe to start working in full capacity following the leader the US Federal Reserve putting to shame all the printing presses in Germany that printed enough currencies to be carried out in wheelbarrows to provide adequate liquidity to fight any crisis. As John Kenneth Galbraith used to say one thing history teaches us is that it repeats itself and history teaches us nothing. Thus people would never learn that creating liquidity, as simple as it sounds, is not the way to solve genuine economic problems. On the other hand, I doubt too many people want to solve economic problems but they rather focus on making quick money.

I don’t’ think the commodity prices will also go up that much because the global economic engine is slowing with too much supply of consumer goods in inventory creating deflation in such supplies. This is good news for the US government since these are the items they give weight to in measuring inflation while ignoring most that matter to the US consumer such as healthcare, energy, shelter and food cost. With inflation being measured thus under control, the Fed even have more reasons (as will be pointed out by the economists in the media loudly and clearly) to reduce interest rates and increase liquidity to run the markets higher.

With these issues in place, I think the US stock market is the place to be till November 2008 presidential election. However, it would be wise to get out of the market a bit early before those who gamble other peoples’ money attempt to get out. So be very careful. Those professionals who gamble have only to lose others’ money but most of you who would gamble in such speculations would lose your own money.