HAPPY DAZE???

As the Dow draws ever closer to 10,000 there are some very serious threats to both markets and the economy that are directly in front of us. The most serious is the imminent collapse or overthrow of the Saudi monarchy. This has only the remotest possibility of a happy ending. The terrorists can attack the refineries in the northern part of the country and end oil production for years with just one attack. We cannot develop alternative fuels fast enough. Those alternatives are at least ten years away.

The next is the obvious failure to deal with the Iraq situation, a situation that grows worse every day. There seems to be no resolve to do what has to be done, until perhaps Tuesday. The Iraqis themselves are being encouraged to just sit on their asses and watch. You can't be a nice guy and fight a war. The Iraq production of oil cannot exceed two million barrels per day til 2007 at the earliest. They don't have the infrastructure to produce more. Iraq oil cannot replace the Saudi oil.

We have a serious potential problem of foreigners owning 25% of our debt and the biggest owner of the debt is China. The Treasury only issues short term notes and this means we are refunding every month. Rates must rise. Must.

The steel tariffs are as bad as anything because Bush seems hell bent on keeping them. The EU- WTO has given us a chance to back off from a stupid and corrupt policy. All we have to do is obey the WTO. Gold going to $400 an ounce is a reflection of the outright fear internationally of what Bush is doing. Make no mistake, the tariffs were a bad idea to begin with; a bribe to a labor union that didn't work. Now those tariffs threaten free trade around the globe. This is worse than you can imagine. You could see a major sell off in the markets if this continues. There is not an economist or financial guy that I know of who supports this really stupid tariff. Watch the main indexes because if they go, your stocks will go. Worse, confidence in Bush may evaporate.

Very dangerous time right now. Saudi monarchy, Iraq turning very ugly, China owning too much of our debt, but the most threatening to our markets TODAY is the steel tariff.