Shiv139

Metalline Mining: Panic Creates Opportunity

In terms of the economic cycle we are entering the late contraction stage which should last some 6 months. The sector expected to out-perform in this period is Financial Services; because of the significant fundamental risks, diversification is key - stay with XLF; any individual company can hurt bad. Also, stay underweight, or even pass on the sector; there will be other sector opportunities with far less risk later in the economic cycle.

The next cyclical opportunity is IT which should start out performance late Q1 09; this sector has very reasonable valuations about now and should be accumulated. After that is Discretionary, which like financial services has fundamental risks, but unlike financial services I believe the risks are largely priced; but this is a buy later story; Christmas could disappoint the sector this year, given the data flow on jobs and confidence.

Then will come materials, industrials and energy. At this point in time Basic Materials is providing an interesting trading opportunity; and perhaps a short term opportunity (3 to 6 months) too. But I expect the cyclical upturn to beginning and early expansion stage, coupled with the secular well being of the sector, to provide better opportunities in later in 09.