Sunday, November 07, 2010

7 November 2010 The Jokes on Him

BAGAKOAA; 7 November 2010 The Jokes on Him

The week ahead is looking very quiet so maybe we can focus on finding value in stocks versus the next data point. There are a couple of things to keep an eye on this week. Wednesday we have the trade gap report. We saw the report tip up a bit in August to about 46.3 billion. That was mostly due to non oil stuff we were importing. The general feeling is that the number should remain flat or even shrink a bit. We are thinking that oil prices will spread the gap further than estimates. The experts are expecting a little drop from a minus 46 billion to a minus 45 billion. Oil should increase the gap to 47.5 and might make the market hiccup a bit.

Wednesday will also see initial jobless claims and the guess is pretty much flat. With the production numbers out there and the number or hours a week getting stretched, I think we will see a downward adjustment in the initial jobless numbers. We will throw out a 435,000 as the number. That should spark the market a bit.

Also look for the nat gas report on Wednesday to state the obvious. (We got way too much of the stuff.) And for the oil inventory report to come in saying inventories are down. (Prices will creep up all week long. They are up in Asia as I write this tonight.)

Friday, we will see the consumer sentiment report. This is tricky as many people saw their 401 Ks improve over the life of this survey, but they were subjected to 4 Billion dollars worth of political ads telling us how messed up things are. I still think we will see a bump in sentiment. It won’t do much for the market, but it would be good to know that people are looking up.

“He Had Another Link And he Had A Cup of Tea and A Butter Pie”

That was from the timeless wonder, “Hands Across The Water”. It is timeless because no matter when you sing it, it makes no sense. Anyway, we are talking about linkage. In this weeks Barron’s, the cover article is about the Chinese spending spree and how it’s shopping cart has changed from all US treasuries to hard assets. Now some of you will think of Mel Gibson’s bum when I say hard assets, but in fact I am talking about companies and commodities. The efforts to dilute the dollar further is under way and China is smart enough to know they do not want to be paid back in dollars that are 5%-50% less in value than they are now. So they are buying iron ore, gold, uranium, copper, timber, oil, and the companies that produce said products. They are doing this not only because of the inevitable reduction n the value of the dollar but because they are changing from an export country to a consumptions country. They actually need these commodities for their growing middle class.

So the link I am referring to is Linkage. It is not too late to discover ways of making money in this shift in asset class purchases by the Chinese. You could read the article and glean about 15 key companies that are or might benefits from these purchase, but another way not mentioned in the article and probably a bit less risky would be to buy commodity based ETFs for each of the categories described.

Here are a few to consider.

Gold buy GLD. Copper and other industrial metals consider VAW. Gold, Silver, Palladium and Platinum, Consider GLTR. A Pure copper play, and there are quite a few, would be JJC.

A Blend commodity ETF to look at is GSCI as it has Ag, industrial metals, oil and energy tracking.

If you think that this shopping spree by the Chinese has any legs, go on line or pick up a copy of the Barron’s article and use and ETF screener of your choice and get in the game. As a quick primer for those that want it. An ETF is an Exchange Traded Fund. It tracks an index (Like the S & P 500 or DOW), a commodity like gold or copper, a group of related companies, or a basket of assets like US dollars and is traded just like a stock. The funds are traded everyday and all day so values are changing on a constant basis.

To give you an idea below is a chart with a one year performance of the ETF GLD compared right below it with the actual price of Gold over the same period. Pretty cool.

From the In The Green Room Gallery

No Mr. President its not a joke.  You lost control of The Congress I swear!

Salve Lucrum
Just like any investment, make sure you know what you are buying. Research the ETF find out what the components are and how they are traded. DO YOUR HOMEWORK.


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