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"The market can remain irrational longer than you can remain solvent" - John Maynard Keynes
Sunday, February 03, 2008
2008 February – December Predictions
1. NASDAQ will see another major fall off a higher peak. QQQQs see less than 40 (buy puts on QQQQ especially as it heads higher)
2. Junk bond spreads widen substantially (buy puts on JNK)
3. Japanese yen appreciates against a basket of currencies but especially against the Euro (and maybe GBP) (long JPYEUR)
4. Sugar and cotton substantially outperform NASDAQ or S&P 500 (SUGA.L COTN.L)
5. Gold and Silver end the year up from here (calls or futures contracts in GLD and SLV)
6. The banking index falls even more from here and banks keep announcing new write downs every quarter (buy puts on BKX RKH)
7. Prestige named banks and the major few monoline insurers are able to access capital and do not go bankrupt (buy calls on MBIA)
8. Japanese small caps substantially outperform NASDAQ or S&P 500 especially in USD (JOF JSC)
9. I continue to believe that my core holdings of Canadian Oil Sands, Northern Dynasty, Strathmore, Fission and Silver Standard will do very well over the next few years. I’d add on weakness, especially Northern Dynasty. I don’t know what will happen over the next year except that you should be prepared to take advantage of buying opportunities in these names.
If you have to own larger cap or well known stocks then Archer Daniels Midland and Conagra are statistically cheap with good dividends (1% and 3.5%). They will benefit from the agriculture boom and will perform well over the next year. (Though not better than the core holdings over multiple years). BHP, Xtrata and Rio Tinto are other blue chip opportunities to add to on weakness that will perform well over the coming years.
I would allocate about 5% of your portfolio to 1-7. As you can see they are all leveraged ideas which should help to balance out short term underperformance in your core holdings.
In my 2007 predictions I forecast:
1. A recession or very low growth period
2. Credit spread expansion
3. Silver, Gold, Oil, Coal and Uranium little changes or down slightly
4. The fed flooding the system with liquidity
5. The goldilocks forecast of moderating but still significant economic growth leading into a reacceleration in the later half of the year would be incorrect
6. 40% chance that NASDAQ 100 would be up
7. 50% chance that commodities would be up
1. I really expected 1 to occur earlier than the very beginning of 2008 so I’m going to call that early rather than wrong.
2. I’ve been dead right on 2 and predicted that would be the best risk reward trade of 2007
3. I was wrong on Gold, Silver, Oil and Coal. Uranium is down from January 2007. I was right not to sell any of my stocks in these commodities.
4. The fed has absolutely flooded the system with liquidity but only since the beginning of 2008 so I’m going to call early rather than wrong
5. The consensus goldilocks forecast was wrong making me correct
6&7 NASDAQ and commodities ended the year up quite a bit and I was wrong on them.
So 3 right, 2 early and 2 wrong. My performance for the year was about 50% in USD so I managed to capitalize on the rights.
Disclaimer and Disclosure
Analyses are prepared from sources and data believed to be reliable, but no representation is made as to their accuracy or completeness. I am not paid by covered companies. Strategies or ideas are presented for informational purposes and should not be used as a basis for any financial decisions.
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