USA: back from "sell" to "strong sell"
Summary
An astute client recently asked me why I am ranting on about America and then have it only as a timorous "sell" on The Economic Clock™. Good question. I suppose because in a "real economy" sense, America's downturn has been well underway for many months. The "new" kick in the teeth has been the psychologically unnerving events of the sub - prime crises leading to diminished shopping enthusiasm. However, what I got wrong was to factor in "lagged acceptance", namely that only of late have investors dropped their wishful thinking and have begun understanding why the Fed has had to cut rates...
Hence, today's change is us catching up with "lagged acceptance". Any of you good at differential algebra will get the hang of this - for us more normal folk, just get out and stay out.
Topics Covered
1. Brief recap of our US concerns
2. How to make money off this
Background
1. Brief recap of our US concerns
- Worsening of The Economic Time™
- Worsening is exacerbated totally by the sub - prime mess morphing into a credit - driven "excess demand for money": banks just don't want to lend. Period.af
- Worsening will be exacerbated after we get the first terrible corporate results in 4Q07.
- Stagflation is looming (we identified this insidious development this March!) what with Congress insouciantly ranting against a strong dollar.
- Consumption is wilting because home owners' shelters are at risk, so wallets get closed.
2. How to Make Money Off This Idea
- Always consult your financial adviser first.
- Short the US market. Buy the Proshares Ultrashort S&P500 (SDS:US), for instance.
- Buy commodities, perhaps via the following ETFs:
- Oil. Seems as if the Muddle East mess is going to worsen. That, along with winter approaching the Northern Hemisphere and energy demand rising in the likes of China and India, means that oil demand has to remain high. (ETFs Oil Securities are one vehicle: see OILB:LN)
- Gold. We all know that this is a "fear" investment. Besides, with non-dollar commodity currencies rising, along with the Euro, gold is cheaper for them than it is for a USD-based investor. So you might want to by Physical Gold ETFs such as PHAU:LN
- Platinum. Johnson Massey has just released its 2007 Platinum Review. Demand os outstripping supply, courtesy of booming car industries in the likes of China and India. Besides, labour unrest in South Africa is not boosting mining output, either. Have a look at a physical platinum ETF such as PHPT:LN
