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More predictions for ’09

Sean Hyman at Seeking Alpha echoes the “seek out ye tech and infrastructure plays” chorus:

The transportation and technology stocks tend to lead the way higher out of recessions and bear markets. So I would suggest looking into the Transportation ETF (IYT) or UPS for an individual stock. In technology, I’d suggest looking to the Technology ETF (ROM). Keep in mind that this is an aggressive technology ETF and it will be very volatile.

Obama, it appears, will also make the infrastructure stocks hot once again as the government spends money on roads, bridges, etc. So I’d suggest the Infrastructure ETF (MFD) or CAT as an individual stock play. Keep in mind that individual stock plays carry far more risk than an ETF.

Exchange-traded funds are all the rage lately for getting exposure to sectors without individual-stock risk. A quick look at the EFTs mentioned above:

  • IYT: iShares Dow Jones Transportation Average ETF. Attempts to match performance of the DJ Transportation Average, which often leads the markets up and down (not always, but it’s fairly intuitive: companies that deliver products are the first to feel downturns.)
  • MFD: Macquarie/First Trust Global Infrastructure Utilities Dividend & Income Fund (MFD). More on the fund here. Frankly the description of this fund is so vague — and performance just as ugly as everybody else’s this year — that I’m a bit dubious right out of the gate.
  • ROM: ProShares Ultra Technology. “Ultra Technology ProShares seeks daily investment results, before fees and expenses, that correspond to twice (200%) the daily performance of the Dow Jones U.S. Technology Index.” So, yeah, super volatility.

One worrisome trait of ETFs: they are heavily traded by hedge funds and big-time financial players — money flow into and out of ETFs doesn’t always make sense in the same way it does with traditional mutual funds. That is, money can be pouring into ETFs even when their asset values are falling because sophisticated traders are using them to hedge themselves eight ways to Sunday.

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Tom Mangan posted at 8:46 am December 23rd, 2008 |

WSJ blogger’s predictions for ’09

Evan Newmark sticks his neck out at Mean Street with 9 predictions of what’ll come to pass next year. At least one is relevant for Caterpillar watchers:

Prediction No. 7: Oil will trade at around $30 a barrel for most of 2009

OPEC isn’t happy with $30 oil. But it will be even more unhappy if Obama goes ahead with all his nutty antifossil-fuel schemes. So OPEC will keep oil prices low until America is lulled into again thinking that $1.50 gas will last forever. That should take about a year. Oil will close 2009 back at $50 a barrel.

Well, I guess this one would be good for all of us if came to pass:

Prediction No. 9: The S&P 500 will close 2009 at 1200, up 30%

In this weekend’s Barron’s magazine (also published by Dow Jones), 11 of 12 “savvy” Wall Street strategists targeted the S&P to close 2009 somewhere between 975 and 1100. The consensus is nearly always wrong. By late summer, third quarter earnings will turn up, investor greed will replace resignation and a late year rally will take the S&P to 1200.

I’d rather not consider how bloody it has to get to trigger a 30 percent rally.

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Tom Mangan posted at 8:49 am December 22nd, 2008 |