I have been finding myself out-contrarianizing myself. Everyone is depressed, so I figure we might be near a bottom. But then I heard someone else say the same thing and I thought to myself, “Hmmm, if everyone is expecting a tradable rally, we’re probably going down.” Of course, tradable, is not what I do, so I’m left confused…which is where I think many are. I haven’t been able to fully comprehend the numbers we’re talking about for a lot of reasons, but mainly because they are staggering. A billion seems like such a small number these days. With economists glibly talking of the $800+ billion stimulus package being too small, GM needing God-knows-how-many-more-billions to stay alive, etc.
So I’m left thinking about a few themes that I keep coming back to: I don’t see rates being raised in the near future, I don’t see taxes going up, and spending isn’t slowing. It leads me to think that our Treasuries won’t be that attractive for long, even if our economy will be, so I’m wary of the longer end on bonds. I hear of China buying up access to resources and can’t help but wonder why if they believed a significant slowdown was in place. So I have to assume they believe they will need the resources, so I’d like to be overweight there. Thatsabet has posted some good stuff on water, and I like the space, along with alternative energy, carbon emmission trading, etc. that are going to benefit from Obama and Co. Healthcare is too complicated. The trends (demographic, political, etc.) are in its favor, maybe. Healthcare tech, bioinformatics, etc. – yes. Drugs – I’m not sure. Healthcare Insurance – I’m not sure. Lastly, the question in all of these cases is whether the individual companies are trading cheap enough to warrant an investment here. There are good investments in my mind. Not to trade. Not to hold for 6 months (average holding period of stocks these days). The themes are long-term themes so the investments have to match. If you’re looking for trading ideas, these themes are the wrong reasons.