Monday, January 5, 2009
1:51 pm - Market Outlook by Bill Wermine
Dear Traders,
I am taking a bullish contrarian view for Q 1 2009. It appears Obama and his Democratic majority will apply heavy pressure on banks to lend again. Interest rates on 30 year fixed rates have dropped to 5.1 % the lowest in 37 years. Many rentors are finding it is cheaper to buy a house than rent and this could put a floor on US house prices and a floor on the credit crises.
Bob Farrell, who was the dean of Merrill Lynch research for 44 years until his retirement in 2001 lived through the roaring 60s, the brutal bear of 1972/1973 the high tech mania of 1990 and the crash of 1987. Before retiring he drew up 10 commandments of investing: Rule 1: Markets tend to return to the mean over time, the market tends to exagerate the highs and the lows. The selling is overdone and so is the buying. Both tend to overshoot. In time the market always reverts to the mean.
10 year T Bond chart
The 10 year US T Bond drives interest rates for the world. It looks like the bubble is bursting as professionals move from super safe treasuries to stocks, commodities and out of US Dollar.
With zero interest rates and massive printing of US Dollars, stimulus and give away packages inflation should take hold. Obama will do all in his power to get the US economoy moving.
For this reason the first quarter should be bullish for commodity related stocks, crude oil and gold. A good way to play oil is the USO fund and XLE energy fund. and GLD . These are exchange traded funds listed on the NYSE and can be traded through your Ameritrade account. Use a 10 % risk on these positions. I also like high quality plantation shares as well as high quality index linked KLSE shares paying dividends.
For the accounts under my management will be accumulating in the week ahead from our cash.
There are no guarantees that these trades will be profitable and as a general rule protective sell stops of 10 % below purchase price is advisable.
In the words of Warren Buffet, "Uncertainty is the friend of the buyer of long term values."
Have a prosporous New Year
Bill
With zero interest rates and massive printing of US Dollars, stimulus and give away packages inflation should take hold. Obama will do all in his power to get the US economoy moving.
For this reason the first quarter should be bullish for commodity related stocks, crude oil and gold. A good way to play oil is the USO fund and XLE energy fund. and GLD . These are exchange traded funds listed on the NYSE and can be traded through your Ameritrade account. Use a 10 % risk on these positions. I also like high quality plantation shares as well as high quality index linked KLSE shares paying dividends.
For the accounts under my management will be accumulating in the week ahead from our cash.
There are no guarantees that these trades will be profitable and as a general rule protective sell stops of 10 % below purchase price is advisable.
In the words of Warren Buffet, "Uncertainty is the friend of the buyer of long term values."
Have a prosporous New Year
Bill
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