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Four investment themes for balance of 2009

|Includes: DBA, FXI, IFN, SHY, TBT, XME

As I sift through SA articles for investing ideas, the following four themes seem dominant among contributors lately.

1. Falling dollar trades. When the US dollar falls: 

  • Commodities and metal prices rise. (DXO, DBA, XME, GLD, etc.)
  • Foreign ETFs rise (AUS, CDN, etc.)
  • You can play it directly via UDP
2. Emerging market growth. China and India in particular suffered a mere slowdown vs. a deep recession in developed markets.. China is doing a massive stimulus anyway. ETFs like IFN and FXI have been on a tear recently.

3. Overbought/bear market rally trade.  Many SA contributors are of the opinion that the current rally is not supported either by macro-economic improvements or top-line revenue gains at most companies. If you still believe this thesis, the conservative response is to simply limit downside exposure by taking profits. The more daring will take short positions via call options or inverse ETFs.

4. Bond market collapse.   Massive gov't. spending = higher bond yields = lower bond prices, so one should limit long exposure (e.g. don't buy SHY), and actively play it via inverse bond funds like TBT. 

The first two strategies have paid off handsomely if you got in a few months ago, but now there is talk about new bubbles in commodities and China. Strategies three and four have yet to really materialize, but could. So the big question here is timing. Is it too late to get on board trains 1 and 2?  Is it too early to get into 3 and 4? Or is it best to simply park your cash and sit on your hands for the next few months?   

Disclosure: Long SHY, DBA, GLD