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So what should we be trading in 2008?
By Derek  •  January 3, 2008
By: Brendan Short equity indices Slowing economy accompanied with high inflation resulted in an economic situation call Stagflation. In this environment, many companies will suffer. This is because revenue and profit growth will slow down, while costs are rising at the same time, many stocks will suffer. We will be recommending customers to short Dow Jones Futures or other stock indices in 2008 when opportunity arises. Commodities Since inflation will remain high as Federal Reserves is unlikely to raise interest rate to curb inflation; Commodities are expected to rise. Even in a slowing economy, demand for agricultural products will not slow down as those are staple food for people all over the world. Population of the world has been rising and will keep on rising; hence demand for food will remain strong. We may recommend customers to buy agriculture products (ie corn, sugar, wheat, soy beans). Traditionally copper demand starts to rise after Chinese New Year. With copper inventory at Shanghai falling to very low level now, we'll not be surprised to see a higher demand for copper from China in the 1st quarter of 2008. Price of Lead and Zinc had narrowed for the past months even though their fundamentals are very different. If the price gap is about $100, we may recommend customers to do a spread trade – buy Lead and sell Zinc. Precious metals The other products that we'll be interested are precious metals. Credit problems had encouraged US government to keep cutting interest rates, printing more money to fund the credit crunch; this will continue to create a downward pressure on the USD. Falling USD will cause prices of precious metals to rise. We will be recommending customers to buy gold, silver and platinum when opportunity arises. Oil Lastly the other product that we are bullish is oil. Oil is not just a demand issue, it is a supply issue as well. About 53% of the proven oil wells come from Middle East. For the past 5 years, there has not been significant new oil reserves been added, and existing oil wells are in declining stage. Currently 1 person in China and India are consuming less than 2 barrels of oil a year. While 1 person in US and Japan are consuming more than 15 barrels of oil a year. As China and India economies continue to grow, more and more people in China and India will own cars, refrigerators, TV, air-conditions, and this will raise current consumption of 2 barrels of oil to 10 barrels of oil in the next 5 years. At that time, oil price could be priced at $180/barrels then. Source: Metal Trading My Comments: I mostly agree with the Author and will be targeting Gold and maybe oil related stocks because I do not know how to invest in other instruments. The usual Disclaimer applies.
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By Derek
Derek is an investor who follows Peter Lynch style of investing. He prefers to use simple and straight forward information for stock analysis. He started TheFinance.sg with the intention to bring together all bloggers and professionals who are interested or already in the area of Finance and Investing, and to create a community where everyone is free to write and to share their articles, experience and opinions.
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