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Stocks and Commodities 4th Quarter Investment Thoughts

Stock-Markets / Financial Markets 2009 Oct 02, 2009 - 01:36 AM GMT

By: David_Urban

Stock-Markets

I would like to start by making a comment on my last article.  Globally, there are values in financial stocks in countries not hit as hard as the US and Europe.  My bearish stance is US based, not global. 


If one takes the time to look they can find good values, especially in Asia and Canada where banks are lending and making solid profits.

Recent home sales numbers were positive.  Inventories are being cleared from the system; which given the new wave of resets is a very good sign.  There is a question of what will happen in 2010 when the tax credits expire.  I have a pretty good idea on how this plays out in the coming year but would like to see more data before my thesis gets solidified.  In the meantime, if sales and inventories continue to fall, properties in the grey market will likely come online.  The faster this glut of grey market properties work their way through the system the quicker we can return to normal. 

The scenario is similar to how tech companies had to wait for equipment purchased by dot.coms who went bust to work their way through the system in 2001 and 2002 before they started to see any growth. 

The recent pullback in gold and silver is a pause that refreshes.  Gold seems to be tracking the dollar which is headed for a retest of the lows made in 2008 which retested lows made in the 1980's.  The key is what happens next year during the period of time when we retest.  Do we dare look back to what happened more than 25 years ago?  I have a pretty good idea how this scenario plays out through 2010 but once again need to see more data before my thesis become solidified.

Neutral to bearish in hard commodities.  There are some seasonal factors at play here and the technical charts do not look strong at all.  An upside breakout would turn me into a bull but I believe each metal, with the exception of gold and silver, needs to take a break and reassess its fundamentals vis-a-vis stockpiles and supply-demand fundamentals. 

Agriculture stocks continue to provided fantastic value and returns if you are willing to do your homework. 

Sugar should underperform relative to other soft commodities.

The broader market is likely headed higher after a correction but there are better returns elsewhere outside the major indexes.  The next group has yet to emerge and assume leadership in the market so what we are seeing is not the beginning of a bull market but rather a correction in a long-term (decadinal) sideways movement. 

The Fed statement spoke about extending the mortgage securities purchase program into the first quarter of next year.  This is an admission that they will not be able to wind down this program as fast as programs like TALF.

Rates will end up staying low in the Unites States much longer than people expect.  I believe that those looking for a rate hike in 2010 will be disappointed. 

The real question going forward in monetary policy is 'Who globally will lead the charge to raise rates?' 

By David Urban

http://dcurb.wordpress.com/

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