Strategy Update Pre-Bell Report for February 1, 2008 -- OPEC Won't Increase Oil Supply and Wall Street Bets Rate Cuts Will Benefit Housing Builders

OPEC MEETING TODAY: My sources in Saudi Arabia say OPEC WILL NOT be increasing it's oil production, as urged by U.S. President George Bush at today's meeting. Reason being, no added demand means no reason to increase supply.

Also keep in mind, they are close to maximum capacity, anyway, and you can't just churn out oil like Dairy Queen soft serve.

Although the price of oil dropped last month, after hitting a record high of $100, due to decreased demand, do not think it is because of recession fears: The drop in demand (and therefore price) is due to a seasonal cycle that occurs almost every year at this time.

Oil may drop to $85 per barrel in February (maybe $80), but expect to see the price rise to $111 per barrel as early as March.

Keep in mind, with the recent 1.25% Fed funds rate cut in January -- and Wall Street placing another half point cut at 100% for the next meeting in March, the oil sheiks aren't going to be too happy about their deflating dollars in which they are paid.

So they tend to want to charge MORE per barrel, not less, to make up the difference.

HOME BUILDERS: With 1.25% rate cut last month (and Wall Street certain of another half point cut at the next meeting), home builders benefited most by the massive cuts, last week, as Wall Street bet the lower interest rates will give a big boost to home builders and sent shares back up, off their depressing bottoms.

A 1.25% cut is a big stimulus boost, but will it actually be able to jump start the industry? All of these cuts are like giving crack to a crack addict. You get a big high, real fast...then you crash (once the credit derivatives market starts to tank over the next five months (starting this month.)

Job numbers will also play a factor in the success or failure of this big home building comeback.

METALS: Batcomputer says Platinum and Palladium will be outperforming gold and silver BIG TIME in the upcoming month(s). PAL is a palladium stock the Batcomputer likes. It's only about $5 a share. BUT BE CAREFUL...it's up 14% today (at 3:00 PM), and it goes up and down a lot in cycles. I would wait for it to drop back down some at this point...BUT, who's to say whether that will happen? LONG TERM INVESTORS WHO FEELS METAL WILL BE ONLY GOING UP...check out Palladium and Platinum, before gold, and I wouldn't be as concerned about waiting for a dip. Palladium stock I like is PAL currently trading at only $5.11 a share.)

Please read this post for more on why we feel the the subprime/derivatives/bond insurance market is much worse than has been disclosed, and how the REAL bottom this year (Dow Jones) is going to be at the 10,700 level between now and August, with lots of ups and downs. (Told you it was worse than accounted for.)

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