So we’re now flying through November, things are getting interesting in my eyes. Statistically the market should keep grinding higher into March but caution maybe warranted given the enormous move we just had. I’m expecting churn and volatility while the market digests this move.
Here is a chart of the S&P Futures for a year. You can see the vicious rip yer face off rebound but now we’re a little on the overbought side. 2000 is clearly a line in the ground so keep your eyes peeled.
I’m also starting to nibble on that controversial sector, the commodity one. Although i am very early to the party ( maybe a year, maybe 5? )…i expect the inflation genie will rear it’s ugly head at some point and the market will flip to the other extreme before settling. Often find when we get one side of the extreme, we tend to rip back through the other side before reverting to the mean. Several years of 0% interest rates is either gonna turn into japan or it’s gonna turn into an inflation monster before that is eventually squashed.
I have been accumulating agriculture stocks for a while ( POT being a long-term hold ) and i think the mining sector has been pounded into oblivion – miners, although not a large part of my portfolio i am starting to find the risk/reward compelling. I am fully expecting more downside on the metals sector but isn’t the rest of the world? If Gold for example does rip down via this ‘vomiting camel’ that is all over the media then 800$ or so should be the final capitulation. The rip down and bounce on friday is symptomatic of emotions and desperation so we are either putting in an early floor or we’re going to bust down big down for the final swan song…we’ll see. In the meantime, i will keep buying and diversifying where possible – i am not expecting any great profits on these for a while but the early bird should in theory get the worm.
Here is a 10 year monthly chart of the GLD, there are plenty of arguments for this to push lower but nobody knows until it happens hence starting my early, small positions now. It would appear to me that anywhere in the upper 90’s on GLD would create some fantastic long term opportunities.
Also the energy sector has been hammered hard, again, this should be a self-fulfilling prophecy, cheap energy means more savings for businesses and consumers which should stimulate demand and eventually energy should rebound. An oversimplification for sure but that’s how i roll. As mentioned in a commodity trading video recently, Water, Food, Energy. These will always be needed so a good chunk of my portfolio is focused on that.
Back to dividends briefly, i’ve mentioned this stock several times in the past and people like a nice dividend grower so i’ll bring it up again, Interpipeline ( IPL.TO ) – it is a TSX stock but it’s been an absolute gem to hold. I’ve had this stock for about 3 years and the performance has been absolutely solid, great management, great prospects and one i’d suggest to anyone with a horizon of a few years to consider. They just announced another 14% raise to their dividend and they have a nice backlog of contracts going out several years.
I also continue to buy the weakness in Brazil for an eventual turnaround – this is my risky speculative play but so many stocks are being nailed by the strong US Dollar, the book values and so forth are too good to pass up. At some point this trend will reverse.
Finally, AIG reported, a pretty good report by all means, although their P&C ratio crept up again which was disappointing. I’m expecting cost savings to kick in over the new few quarters. Watch the price action relative to the S&P. You can see some big players are steadily accumulating here, it may even be the buybacks from the company itself. The price action is looking bullish in my eyes. I’m expecting this $54-$56 level to take a while to push through but once $56 goes, it should be a quick trip to the 2011 high of around $61 before resting again.
Have a great weekend.