Wednesday, December 10, 2008

Stability?? Say It Ain't So

I sold my SDS today (at about the low of the day) but I just felt like things are calming down and I decided to allocate my capital elsewhere. If you look at some of the oil sector stocks RIG, DO, NOV they are beginning to get some bounce. That tells me that people have started to believe that oil has overshot to the downside. I think it has and I am looking at buying some USO. I said in a post last week that the dollar was really really important. The dollar rally looks tired. As the dollar declines, I believe that we could see some real upside in crude. I think the dollar rally had a lot to do with ending the bullish momentum that we saw in crude and I think we are going to see the dollar cause the end of this bearish trend. We have mortgaged the dollar beyond belief and all of this debt is going to come home to roost.

I am preparing to play inflation full force and I go back to something Jim Rogers said in one of my conversations with him. Stocks can go up during times when inflation is rampant. His point was that you could invest in stocks and see nice gains, but lose value if those stocks are all dollar denominated. I am going to fully analyze the Rogers theory vs the Bernanke theory (referring to when Bernanke told Congress that the falling dollar wouldn't hurt anyone as long as they were buying domestically--that was paraphrased of course)this weekend.

I favor a UUP short here. Again I think the dollar rally is very tired and ready to reverse. One of my other favorites that has held in very well is CMP. Compass Minerals got hammered along with many of the other fertilizer producers. They are one of the best run companies in my opinion and I think they can get back to $65.

Need I talk about the jump in gold today?

What you have to be careful about right here is financing. My grandfather was a great investor and he would have been drooling as some of his favorite stocks dropped at the pace that they have over the last few months. The issue that bears watching is whether or not these "great names" can obtain the financing that they need for growth. The credit landscape has changed and before I buy any individual stock---I want to know how able they are going to be to get the right financing in the next 3 years. Its not just about getting credit, it is about getting credit at the right rates.