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Thursday Outlook: Commodities, Emerging Markets

by: David Fry September 04, 2008 | about stocks: DBA / DBB / DBC / EEM / EFA / EWZ / FXI / GLD / IFN / MOO / RSX / SLX / UNG / USO / XLE    
David Fry

David Fry

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You’d be right to think conditions are screwy. After all, selling the hell out of companies that actually produce useful stuff and buying troubled financials makes little sense on the surface. Bulls are convinced they can buy the latter with impunity since the Fed/Treasury have their backs. It only makes sense with that in mind.

You’re also wondering why I keep posting the same market sectors all the time. That’s a good question. I do it primarily because these are the markets that matter currently in my opinion. I also do it in the interest of time. But, if you have a special request, I’m generally happy to oblige and you may contact via email: dave@etfdigest.com.

Have a pleasant evening.

Disclaimer: Among other issues the ETF Digest maintains long or short positions in IWM, UWM, QQQQ, QLD, XLP, UGE, XLY, IEF, TLT, UUP, FXE, DRR, GLD, DZZ, DBC, DEE, USO, EFA, EFU, EEM, EEV and FXI.

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This article has 7 comments:

  •  
    Sep 04 04:42 AM
    The financial sector of the market is comprised of many segments,some with a greater degree of the risk than the others.It is the sellers (shorts) that had gotten away with impunity by disseminating the rumors or distorting the existing status quo.Untill recently recession was the economic consensus of the U.S status quo(I have always stated that we have decelerated but are not in recession).Now all of the sudden,the consensus had tilted to my opinion.The stock market however had adjusted for a recession.
    That consensus miscalculation has created a relative investment value out of the equities(housing sector as well).
    Since the financials were "punished " the most, they do offer a significant relative investment value.
    In addition we have learned that the FED and the Treasury will "deflect" potentially broader and severe issue by providing more acceptable solutions to the specifific "problems"
    In fact in the eighties the example was set as the FED had to address the S&L issues.
    In the current cycle we have seen an attempt to subterfuge entities such as MBIA and AMBAC by distorting their status quo.
    We have heard distortions about the FRE's and the FNM's ability to fund themselves .In the meantime both agencies have excess capital(above the required margins).
    The banking institutions had writtent off "risky assets"quite aggressively and had raised additional capital.
    Clearly then the various components of the financial sector had and are addressing the issues with the help of the FED ,Treasury and the Administration.
    Selectively this decimated sector offers significant relative value.
    I will say this again ......I just wish that the risks in that sector were noted two years ago (I did in the news media) ,if they were, the current debacle would have been avoided.
    The market risks always exist,bu the U.S is on the way to a major economic/stock market rebound.
    Reply
  •  
    Sep 04 08:30 AM
    The fact that there is still debate as to whether or not we will have a Recession (a formally normal part of the business cycle) After the collapse of the biggest credit bubble in history, and after the disintegration and insolvency of most major banks, tells of a complacency which will only be removed by a Major Depression.
    The Bulls should hope for a recession. The Fed is not an all powerful Santa Claus: remember the "free markets" the elites used to pay homage to? That's before the criminal banks became beggars.
    Reply
  •  
    Sep 04 08:34 AM
    I love all your work! Thanks for putting your time in to write these posts!!
    Reply
  •  
    Sep 04 10:09 AM
    Gabe, brevity is definitely not your strong suit. Please don't blog litter and loiter. Get your own blog and stop this repetitive daily posting on Mr. Fry's column.
    Reply
  •  
    Sep 04 10:49 AM
    I'd suggest adding Canada (EWC) to coverage - it's a G8 economy (running fiscal surpluses) not included in the EFA basket, US's biggest trading partner, and while I see the inclination to thoroughly "do the BRICs" I'd say Canada's a better energy/resource and banking play for investors, without the regional soap operas.
    Reply
  •  
    Sep 04 02:40 PM
    Mr. Borenstein:

    "It is the sellers (shorts) that had gotten away with impunity by disseminating the rumors or distorting the existing status quo."

    Would that be rumours like the one about a rescue for LEH? Sounds worthy of an investigation.

    "Since the financials were "punished " the most, they do offer a significant relative investment value."

    I simply cannot see how most banks can be meaningfully valued at the moment. Care to share your formula?
    Reply
  •  
    Sep 04 03:49 PM
    I like the notion of adding Canada as well -- it's a lot closer to most of use culturally and economically than a lot of the other foreign ETFs. Of course, maybe that makes the S&P or Russell indices close enough to not need it. I dunno.
    Reply
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