HardAssetsInvestor

Mike Norman (Norman): Hey everybody, and welcome to HardAssetsInvestor.com. I’m Mike Norman, your host, here with my guest today, Matt McCall, who is the president of Penn Financial Group, returning to the show. Matt, it’s been a long time. Welcome back.

Matt McCall, president, Penn Financial Group (McCall): Thanks Mike.

Norman: I wanted to have you here to pick your brain on your outlook on the commodities markets. I know it’s an area that you are very, very active in. And I know that the last time we spoke, you were a major roaring bull in commodities.

That’s played out. But recently, we saw somewhat of a correction, in many areas. Particularly, why don’t we start off with oil, where we saw the market peak out in April around $114. We got down to about, I think, $89-something, seeing a bounceback now. What do you see for oil for the rest of the year?

McCall: Well, I think there's two drivers when you look at oil. One’s going to be, obviously, the global economy. If people perceive the global economy bouncing back up, I think you're going to see oil triple digits very easily.

Norman: Do you see that bouncing back up?

McCall: I do. I think the summer months are going to be basically sideways, with a little volatility from day to day. However, I think we’re going to see a boost in the economy in the second half of 2011, which will boost oil back probably close to that $115 level that we saw earlier this year.

The other driver is going to be the U.S. dollar. You look at that U.S. dollar − and I looked just before I came here − it peaked out in, what, 2001, around 125 in the index. We’re now down to 72. That’s an enormous hit. It’s been in a down trend, now for 10 straight years. This government − regardless of what they have to say − there's no such thing as a strong dollar policy. The U.S. dollar, in my mind, will continue to fall. And that’s going to push commodities higher.

Norman: But if you look at that dollar index, since 2008, since the Lehman crisis, I think we got down to 70 on that dollar index. So we’re not that much above it, but we are above it. And we’re above it, even though we’ve seen two phases of quantitative easing; the most recent one ending, of course. But, the dollar − it looks to me like it may be putting in a long-term bottom, no?

McCall: We’re going to disagree on this. We disagree quite often. But we’re going to disagree on this, and I’ll tell you why. I think the only reason the dollar is still above that 70 level on the index is because every other currency stinks as well. You look at the euro − why would I go out and buy the euro right now?

So the fact that the euro is weak, the U.S. dollar, in my mind is weak, but I think, eventually, the euro wins out. Even though I may not agree with what’s going on in Greece, they're going to fix things for the short term, and that’s going to push up the euro. That’s going to push down the U.S. dollar.

Norman: Push it up. So what’s the short term on the euro, in your view?

McCall: I think we’re probably another 5 to 7 percent on the upside from here, and will probably test the highs from earlier this year. But then we’re probably in the trading range from that point.