"Every man prefers belief to the exercise of judgment"
Seneca
Hopefully the number of recession non believers is once again on the decline which is in itself a bullish sign. Intrade is showing a 75% probability will get there, so once we get over a 90% threshold it might be a good time to buy :)
Quick notes on the latest news- ISM numbers were simply ugly this morning, but the worst part is the noted inflation pressures are becoming a concern to the survey participants. Headline inflation is not as dangerous as a the potential shift in inflation expectations...It's getting scarier out there each day...
"The New Orders Index contracted to 43.5 percent, the lowest since October 2001. The Employment Index contracted to 43.9 percent, the lowest since February 2002. The Prices Index decreased to 70.7 percent in January, indicating a slight slowing in price increases for January. According to the new NMI, only three non-manufacturing industries reported growth in January. Members' comments in January indicate that weakness in the economy coupled with increased costs have negatively affected their business. Members have also indicated that they are experiencing inflationary pressures. The overall indication in January is that non-manufacturing has come to the end of a long-term period of growth and has contracted for the month of January."
I am leaving for the Money Show tomorrow and hopefully I'll see some of you down there but if not- here are some of my key investment themes which are still inline with my 2008 market forecast from December:
• I still believe that recession is inevitable. This belief has not changed in any significant way since late November 2007 and all the most recent events (Loan Survey, ISM, Payroll Date etc) seem to confirm that we actually might be there already
• I also think that Fed aggressive rate cuts are leading us in a wrong direction- they not only won't save us from recession but are likely to blow another bubble in something. It is also likely that current short term refinancing boom could add some more "questionable" assets to banks' balance sheets. It is true that underwriting criteria are a lot stricter than they used to be, but 90% loan to value refinancing is still a valid option at some lenders, and to me with continued slide in housing values, that recklessness is simply silly
• Agriculture related stocks like POT, MOS, MON etc. feel quite "bubbly" and while most of my screeners stubbornly bring up MON as a top large cap pick, I refuse to buy it back for now. I think that once the politicians come to their senses with the outrageous "ethanol" push, some of the AG stocks will go down hard and fast
• On the other hand - while solar stocks are likely to trade in sympathy with oil (directionally down), given the severe declines in these stocks since the year end I think that some kind of bounce is possible in the near term future. The catalyst for that is likely going to be the solar credits extension bill. It is currently attached to the stimulus package, but it is actually more likely to make its way in a separate bill later in March-April. In this field I like some of more solid profitable names like JASO, SPWR and STP, but if you buy them in the short term- expect potentially violent swings in each direction and thus if you don't have patience and not willing to average down- stay away...
• But that does not mean I won't have new ideas. Some of the good ways to play the downside are ultra short ETFs like FXP, SKF, TWM, SRS, EEV, SDS and QID. But don't forget these are leveraged so by placing 20% of your funds into these you effectively take a 40% short hedging position...
Anyway, stay safe out there as market waters seem quite rough and also please feel free to drop me a note at skepticalcapitalist@gmail.com
Archive Comments (1)
What is your opinion of clean technology and the growing need for electricity? Composite technology CPTC.OB is one company that has a very promosing future.
Posted by Billi Mattson February 11, 2008 9:59 AM