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What Are Your Thoughts - Where Does The Market Go From Here?

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March 19, 2009 – Comments (4) | RELATED TICKERS: B , EAR

With the S&P rallying over the last two weeks, the FED injecting $1T into the economy through the purchase of treasuries, gold nearing $1000/oz, and oil reaching near-term highs, where do Fools think the market is going this summer and what stocks are you watching?

My thoughts:

1) This rally is a bear market rally. I'm not sure if a bottom was established, but I foresee the market giving back at least some, if not all, of its gains by June. Are FAZ and SDS looking attractive now?

2) Depending on how fast the FED tries to inject liquidity, inflation will start to become a problem by the end of the year. This move was to incite a market rally in financial stocks and catch the shorts with their pants down (which the government has done several times already, usually on options Friday).

3) Gold - it has had a good run and needs to pull back a little, but the FED's announcement won't help. Everyone needs a little exposure to gold despite personal feeling towards the yellow metal (check emotions at the door). I could see gold at $1500/oz by the end of the year and easily over $1000/oz in the short-term. Do people favor the miners or the gold bars? GFI, AUY or GLD?

4) Oil - demand still isn't there and the recent US inventory report showed vast supplies, but I still think oil is going up and won't re-test the bottoms already seen. $60/barrel by the end of summer may be reasonable depending on economic data. CVX, RIG, XTO?

5) Agriculture - this is my favorite sector. The world needs to eat. Wheat supplies are decreasing as new harvest aren't large enough to replace supplies. Farmers are buying genetically modified seeds for their growing season. Fertilizer orders are being put in (plus these companies keep trying to buy each other and consolidate the industry). Personally, I could see Ag starting a 10-year bull run in the near future. MON, TRA, POT, DE?

Obviously, this list wasn't meant to be comprehensive. What are your favorite sectors and stocks going forward? Do you see the market giving back recent gains and maintaining the bear market?

Thanks for the input and thoughts.

4 Comments – Post Your Own

#1) On March 19, 2009 at 11:52 AM, Imperial1964 (97.93) wrote:

It's heading back down again.  But when it drops I'm going back to buying heavily.

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#2) On March 19, 2009 at 12:18 PM, awallejr (84.46) wrote:

Oil should be a nice short term play.  It has slowly inched its way up, even after the latest inventory report and Opec declining to cut production. $60-75 barrel by July 4th?  Ag should follow since it tends to act in tandem with oil.

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#3) On March 19, 2009 at 12:35 PM, kdakota630 (99.92) wrote:

Your thoughts are pretty much the same as mine.  I don't know if it's a perfect time to buy FAZ, but I doubt you'll go wrong buying at the $30 range where it is currently.  Instead of SDS I'd be more likely to buy SRS.

From a marco standpoint, the main difference between our strategies is that I won't be investing in U.S. equities for a while.  Perhaps I'm biased being Canadian and all, but I think it's safe to say that Canada is the better country for investing for the next few years, especially after the Fed's decision to buy long-term treasuries.  With the exception of leveraged short ETFs, the vast majority of my investing will be within Canada, Australia, Brazil, and China (the CABC nations, and yes, I just made that term up).

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#4) On March 19, 2009 at 1:02 PM, lenri (80.05) wrote:

I believe also that this is a bear market rally but...I think bottoms have been reached in this recession for now. That doesn't mean that the DOW will not go lower. The markets are not logical which is why some industries are valued at 1/3 their historical p/e's. Gas and Oil are ridicuously undervalued but so are defense stocks. Everyone thinks that because Obama is the president the radicals are happy. That thinking will change at some point in the near future. Obama may want very much to drastically slash defense spending but the terrorists and the Middle East situation will force him to re-think the situation. Watch Israel. I think Netanyahu will bomb Iran. They are not going to allow that country to have a nuclear bomb regardless of world opinion. They will protect themselves from any perceived threat.

I agree that the agriculturals are undervalued. Many stocks are still off 60-75% like MOS from their highs even after the March rally. That is silly. Last but not least. All retail and dining stocks save for WMT and MCD and a couple others are way down. Much further than their earnings warrant. There are some terrific long-term buys looking at the investor right now. I wish I had been as prescient as some of the Fools and socked away a ton of $$. I would be buying as many blue chips as I could get my hands on. Even with double digit inflation coming by '11 or '12 many stocks are going to double and triple by then. There were great preformers in the late 70s and early 80s the last time inflation was rampant and there will be many again.

I have been sitting on a few $$ having cashed in a little with the last rally. I will not buy until the next downward spike. I have learned my lesson. I bought heavily right after Obama won and right before Inauguration day wrongly believing the media's reports about the messiah's appeal to the populace. I got crushed both times. Now I buy only after a downward spike and sell on an upward one, playing the Beta.

I do not believe the world is coming to an end. Many bears even in Fooldom continue to ignore what they are seeing with their own eyes. Contrarianism means going against sentiment including negative sentiment. Markets have ups and downs. Each time the correction from high to low and vice versa is way over done creating an exciting opportunity for investors.

In my humble opinion if you really want to know when we can say the recession is over watch the sales of Home Depot and Lowe's. They went into the tank first and logically will be the first to recover. Ditto Auto Zone which recently reported a surge in sales. Peter Lynch commented extensively on the frequent peaks and valleys of the automakers. He would follow car parts dealers' results to predict the next movement in that market (his favorite was Cooper Tire & Rubber). If you are not buying a new car then you need parts for the old one. Likewise if you are not buying a new home you need supplies for the old one.

Exciting and Gut-wrenching times are here in the investor world. I often said that I could make a ton of money in a nasty bull. I was wrong because if you are fully invested when the correction hits then your portfolio is devestated leaving it impossible for you to buy the cheaper plays lest you take the huge losses elsewhere. Damn! Wish I could hit the lottery.

Thanks for you blog. Fool on!

 

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