Numb Skulls

JPM increased their derivative portfolio in Q2/07 by $10 trillion notional to a grand total of $80 trillion. In the second quarter alone it grew by $151 billion per day, according to the Comptroller of the Currency just released. Just as end user demand is thought to have been peaking.

The questions not being asked of the ever popular Merrill Lynch losses this past week are...it's bad to lose $8 billion of their own money....how much of their clients money was lost? The other question of course is how come all these derivatives aren't saving the day? This will only get worse not better.

Oil and Gold are crowded trades so we are taking nice profits today. Canada reaffirms the new trends to raise taxes. The Fed will disappoint tomorrow and the dollar will rally. Nat Gas is still way under priced and is moving higher as it should. Asia and Baltic shipping rates are too high and too need to correct...VLCC rates are too low and have started to rise...so has Frontline.

Sam Zell a savvy investor sold all his real estate holdings this past spring. "Somebody made an offer that was wide by a significant margin of my own valuation. So I'm looking in the mirror, and any day you don't sell, you buy, and I wasn't willing to buy at the price they were willing to pay, so I sold it." Sam is a professional opportunist.

Smart people we know are not in oil or nat gas. They are not in Asia, they are in cash and bearish and concerned about real estate. We like real estate and the rest of the world right now as well as being long the market but have raised some cash here for awhile....we like Water as an on going theme and have started adding to our water positions in Asia.

Hedge funds will continue to squander other peoples money (OPM) and traditional long only equity investing has started it slow climb back. The first correction did not scare enough people to get out...they are staying too long at the perceived party here...

Tax fairness? The left is clueless, more government is not going to be the answer. The rest of the emerging world is going to a flat tax growth mode and we go the opposite direction.

This next year is an important time for America. Lets hope the masses are better read when voting time rolls around a year from now.

Danny Boy seen here has a big skull, he is very smart and a quick study you only have to tell him once and he gets it!