Sunday, November 9, 2008


China announced a $580+ billion dollar bailout today. This has the futures moving up as are the Asian markets. Why will a Chinese bailout work better than the domestic ones we have seen? It is simple. China has been running surpluses and needs the infrastructure part of their bailout anyway. I was very pleased to see their plan, especially in light of the fact that I have been positioning my portfolio believing that the global growth story was not over. I am very pleased with FLR and expect that it could hit $100 in the next 12 months. I know that is an aggressive call, but the company is still delivering records with each quarter and if the global growth picks up--they should really move up rapidly.

Another favorite of mine XTO Energy (XTO) is poised to benefit from the Chinese Plan. Oil jumped to $64 in the current overseas session. I heard Karen Finerman of Fast Money suggest that the USO (the oil exchange traded fund) be used as a hedge if you wanted to play certain commodities stocks. Specifically she was discussing someone's bullish call on U.S Steel (X) and suggested that you hedge that play with a short on USO. I think we will see oil be used as a hedge---I have even suggested that it is a better hedge against inflation than is gold. If the dollar starts to weaken, we will most certainly see oil move up and these that are on the short side are going to get caught. My guess is that many of the momentum players have been jumping in to short oil, and the rally off of this stimulus could take us back over $80.


Anonymous said...

$140 oil was from fear and emotion. We need to start paying attention to the future demand for oil from the emerging markets. Alternative energy is not going to have an impact in the near future. Oil and natural gas are our main resources right now and especially for developing countries.
Once the fear of global recession has subsided then we are going to see some good plays in commodity stocks such as X and XTO.

Dollar.Discipline said...

All eyes had better be on China for a while now. They will be the big players in the market one day. And most likely sooner than we think.

Anonymous said...

It is amazing how fundamental the importance that China has on our economy and still some want to ignore the fact. Alot of demand for our commodities is coming from China.