Obama Rally?
I've been waiting for a rally in the markets for some time now, and I'm beginning to think I missed it. From the Nov. lows to the Dec high was a move of about 25%. Energy stocks rallied about 33% in that time period. Was this the bounce that I was waiting for? I must admit that I was looking for a general market rally going into the new year after tax loss season, as well as with the lead up to the presidential inauguration. Now that we're on the eve of Obama's ascension, I believe there won't be any further significant rally! The bad news continues to worsen and now the European banks are blowing up real good.
The amount of money going to failed banks like BAC, Citi, AIG are sickening - money that could be used to take care of the unemployed and homeless!
Gold as a store of value versus currencies is looking like the safest bet. Most countries are getting hit hard with unemployment and trade. The recipe seems the same the world over - deficit spending, and gov't handouts to banks. Can protectionism and competitive devaluations of currencies be far behind?
I'm still looking at other infrastructure companies that should benefit with the various stimulus plans floating around. I'm keeping an eye on ABB, the maker of electrical infrastructure.
Something I picked up recently was Claymore's TSX Preferred Share index. Symbol CPD. It pays a dividend around 6% and holds mostly canadian bank preferred shares. I've been toying around with buying some CIBC preferred because they were the first Cdn bank to get hit by the subprime and they issued equity early during the credit crisis when they still could. I decided I didn't know about other skeletons in the banks' vaults so I took the index route. What's the downside of owning Cdn preferreds? Does the future of Cdn banks include a gov't bailout? If their dividends go, the common shares go first.
Having cash is probably the safest during this deflationary shakeout. (I consider gold as good as cash by the way!)
Labels: gold, infrastructure, preferred shares
posted by Des @ 1/19/2009 09:22:00 PM
2 Comments:
Yesterday's rally not withstanding, I would tend to agree with your assessment. I too was looking for a rally in Q1 of 2009 but now I think there is a higher chance of retesting the lows. But given my recent record of predictions, this may be a contrary indicator. :)
In terms of sectors, infrastructure looks to be the safe bet. Perhaps we should switch into CAT? I also like tech infrastructure, since Obama is the first "technology" president. Every time he mentions building "bridges and roads", he always includes extending the internet and wi-fi buildout. I think companies like BRCM, QCOM and even IBM will benefit from some gov't spending.
Yes maybe CAT is more diversified in terms of less reliance on Agriculture, although I still like the agriculture theme. People still got to eat. I read in Potash's earnings report that it's still worthwhile for farmers to use fertilizer because for one dollar of investment in NPK, you get $3 in Ag profit! Maybe Fulton Associates should go into farming!
I haven't noticed Obama's talk about tech. infrastructure but indeed this would make BRCM interesting.
One criticism I've heard about these stimulus packages is that they're using such large numbers that there aren't enough decent projects around to soak up the funds and excess labour. Oh well, Keynesianism never required much thought. Building bridges to nowhere is exactly what Japan did in its lost decades!
Post a Comment
Subscribe to Post Comments [Atom]
<< Home