Three Ideas for the Year's End

Here are three ideas I'm focusing on as the year winds down:

• Oil Rebound: Scaling into a long bet on the price of oil looks smart. Futures and futures-based investments are barely budging as oil makes new lows (for this cycle) under $35, with $40 still acting as a strong tug upward. Most analysts peg the fair market value of oil at $75 or so, a long profitable trip from the current basement.
• Treasury Crash: Treasuries have gone parabolic with yields crashing last week on news that the Federal Reserve is entering quantitative easing mode, with an eye on buying Treasuries like there's no tomorrow. (Some say there isn't, however, so be aware of that.) Parabolic spikes end in waterfall crashes, so the short side of Treasuries is worth a gimlet eye.
• Magical Midpoint: Stocks usually begin their next genuine bull rise about halfway through a recession, what I call the magical midpoint. Most economists project that this current recession will last between 18 and 24 months. The National Bureau of Economic Research said it began a year ago. In light of those thoughts, stocks deserve a place on the radar screen.

As the riots begin around the world, be thankful to live in a country built on more than a rising economy. The ideals of democracy go deeper than gross domestic product, and America sits atop a very strong foundation in that regard. Others, such as Russia with its momentary look of legitimacy based on the price of crude oil, have no such strength.

If happiness is relative, Americans should be smiling in the global recession. Been to a mall this month? Adorned with lights and ribbons and filled with Christmas songs, it's an immediate reminder that even bad times in America are pretty darned good.

Comments

[Paul Price:]

All three ideas seem to have merit.

Logical thinking all around.

2008 Dec 23 08:04 AM

[OldLimey:]

With you all the way on oil. With you on Treasuries as well, but concerned as to timing since BB has a big cheque book (well, actually, it's your cheque book - calling it 'his' is poetic licence). Agnostic about stocks, but sense there might be one (perhaps more than one) more buttock-clenching downleg to come in Q109.

2008 Dec 23 01:54 PM

[Moon Kil Woong:]

Oil is low, why not buy it for the long term, bonds are low they are bound to go up. Stocks may go up, keep an eye on it. I sense a distinct lack of analysis and lots of snake oil.

The 12-14 month period for recession is an often cited statistic. So let me revisit the history of this market tidbit.

First, pundits derided anyone saying there was a recession until November. Then they said the recession has been going on for 3 quarters and that most recessions only last 1-1.5 years. So hmmm, naturally the market is a buy huh? Just like they said it was a buy in June, July, and August. Then September and October it was a once in a lifetime opportunity. Now it's a great stocking stuffer.

Because I wish a happy holiday to everyone I suggest that you be prudent this year and make sure you save cash to get through this down period. Have a safe Christmas/Hanukkah/Win... Solstice/New Year and drive carefully.

2008 Dec 23 09:39 PM

[Takayama:]

User 293672 must learn your lessons fast. When ML call a buy, you do a sell if you doubt their words. Good luck next time.

2008 Dec 25 02:29 AM

[Takayama:]

User 293672 must learn your lessons fast. When ML call a buy, you do a sell if you doubt their words. Good luck next time.

2008 Dec 25 02:29 AM