I’m thrilled that the stock market is going up, making my inverse fund go down and its purchase very cheap right now. In essence, I bought at the bottom. I am so happy that these funds are now available, just in time for our stock market crash. The inverse fund works exactly as it should: as the market is rallying, the fund is going down. That’s what it’s supposed to do, and unlike the Profunds inverse funds, the Rydex inverse funds do track the inverse of the index they are supposed to correlate. By next spring, when the Dow is down 30%, my 2005 inverse Dow fund will be up 60%. I have a running bet with Steve Beebo to compare our portfolios in March 07, and I’m happy to have cabinboy and privatebanker join the contest. Winner buys lunch for the other guys, want to join?

Just now, I read Roubini is saying oil prices are down because the economy is slowing, so lower oil prices are a result of a slower economy and not to be mistaken as fuel for growth, i.e. now consumers have more money to spend.

He also writes about this sucker’s rally in the stock market. The market participants are betting on a Fed rate cut, hoping that will stimulate company profits.

“Indeed, in typical suckers’ rally mode the S&P index rallied a whopping 18% in April and May 2001. It was only in June 2001 when even more severe signs of a recession clearly emerged that the stock market started to rapidly tank into a free fall. So, such stock markets suckers’ rallies are very common at the outset of the recession. The reality is that stock markets are often wrong: sometimes they predict recessions that do not occur but, at times like in 2001, they fail to predict recessions that are already ongoing. ” – Roubini