Dec 31, 2010
Netflix Party Coming to an End: A Not So Bold Prediction for 2011
“We think the U.S. economy will slow [next year] but narrowly miss an outright recession. We expect the overall stock market to bounce around, as it did this year, and deliver anemic single-digit returns.”
Sound like a reasonable prediction for the 2011?
It would, but it’s not. That was a prediction from Fortune magazine’s The Best Stocks for 2008.
The “best” stocks for 2008 included Merrill Lynch which was rescued by/merged with Bank of America (NYSE:BAC) hours before it went bankrupt.
General Electric (NYSE:GE) made the list too. It only remains a conglomerate because of multi-billion dollar behind-the-scenes Fed bailout. Its shares fell nearly 80% after that prediction.
Red-hot Brazilian oil company Petrobras (NYSE:PBR) was the “best” energy play for 2008. That year its shares actually managed to outpace the 70% drop in oil prices.
Making predictions is tough. That’s why we’ve learned the fundamental principles of risk and reward are the key to investment success rather than predicting the near-term future.
This year, however, we are willing to venture one prediction. It’s one that’s a bit contrarian, goes against a very popular trend, and the rewards will far outweigh the risks as this story plays out in the next few weeks.
Dec 22, 2010
Coal Mining Investing: The Best Way to Play this Commodity Shortage
By Andrew Mickey, Q1 Publishing
China has been hit with a new commodity shortage.
Forbes reports, “Power cuts and rationing are hitting parts of central and northern China as winter coal supplies fall short of surging energy requirements due to extreme cold and transport disruptions.”
Boring old coal has become the commodity du jour. And investors have been bidding up anything and everything related to coal.
The excitement around coal has been building for months. The recent shortages have only brought more attention - and investment capital – to coal.
But investors who look at recent history will quickly see the coal industry is exceptionally prone to booms and busts. Heck, it just the last 10 years has been through two cycles and started a third.
The current cycle is certainly not different this time. But with the run-up in shares of the big coal miners and a great story to push them to even greater heights, a high-potential (1,000%+ gains) opportunity is being created. It is not, however, going to be where most investors look.
Dec 19, 2010
This Reliable Oil Indicator’s Surprising Signal
Think $88 oil is too high?
From the current macro view, it would certainly seem so.
Global GDP growth is expected to come in at a relatively meager 3% next year. Rising commodity prices have dented many consumers’ discretionary incomes. China’s central bank is hiking rates to keep inflation in check. Official unemployment in the world’s largest oil consuming economy is well above 9% and poised to stay there.
It’s not a pretty picture from the top-down. However, one of the best indicators of long run oil prices is signaling $88 is more than justified and reveals why one small sub-sector of the oil industry is growing nearly five times faster than the rest of them.
Dec 16, 2010
Stock Market Bulls Warned: Get Ready for a Sharp Drop in Stocks
The Bernanke Bubble is showing its first weakness in months.
Yeah, I know. Stocks have continued to inch higher almost daily. The volatility of late spring is a distant memory. The only uncertainty for most investors is seemingly how great next year will be.
Two indicators, however, have recently flashed some major warning signs. The last time they did stocks fell 48% and 20% across the board.
That’s why now the prudent move is to take precautionary action, build up some cash, and prepare for a sharp and unexpected (for most investors) dip.
Dec 07, 2010
The Big News Everyone Missed
It’s hardly a surprise anymore that the financial media, and by association most investors, miss out on the most important news.
Over the last week your editor has been on the road again (using “road” loosely).
A little over a week ago we traded in our comfy confines in central Arizona for an 8,000 mile trek halfway across the world.
The 36-hour journey plunged us into the Philippine jungle exploring a unique low-risk/high reward gold investment strategy for Prudent Investors. Despite the off-road trucks bouncing across roads only the locals could see and a rickety wooden boat which after hopping on you reflexively count the life vests and after engine fires up you look for oars that you’ll likely need at some point, it was nice to get away from the daily crises of the markets.
It helps to get a clear head and time away from the market swings always serves as a solid reminder that a 5% move – either with you or against you – isn’t much to get worried about in the big picture of investing successfully.
But now that most of the deep-in-the-woods work is over, we’re back in a downtown Manila hotel. It’s about 100 degrees. The heat and humidity makes the Christmas music blaring in the mall across the street a bit odd, but nice. It’s almost two o’clock in the morning and there’s still enough traffic even to frustrate an L.A. commuter. But we’re back to civilization and we were kind of excited to log onto the well-traveled laptop to see the major news for the last few days.
Of course, the “big” news didn’t have too many surprises. Unemployment hung steady around 10%. The tax compromise, which was essentially a done deal after Election Day, is now nearly finalized. As for the markets, everything that was going up continued to go up.
Not much to worry about really. But then I came across something incredibly important. Of course, there was significant news that most of the investment world simply passed over. And it explains what’s going on in the markets, where the opportunities lie, and what to do now.