Obama's Inauguration: Three hands-on investment thoughts
Wednesday, 21 Jan 2009
You all have received the notes which I prepared for this morning's CNBC appearance. Here are a couple of other investment-specific thoughts to mull over.
- Short the government bonds. By warning of the arduous road ahead, he must be aware that the current, overall stimulus package of some$ 4 trillion ($ 2 trillion from the Fed, the rest from Bush and from Obama) cannot get the economy moving: banks just don't to lend. In the jargon of our Economic Clock™, the excess demand for money will stay for a long time. This means that the excess supply of goods intensifies, as in: even more unemployment. This means that he will have to borrow even more money, and that will prick the T-Bond bubble even more, once markets catch on to this build-up of debt. Investment implication: since we recommended the ETF that shorts US 20-year government bonds, the instrument has leaped by 11%. Keep buying.
- Short the US stock market. In his eloquent speech, he (correctly) said that the wealth must be more evenly distributed. That goal, along with the just-mentioned need to spend even more in order to re-kindle the economy, means that taxes have to rise. Investment implication: markets do not thrive when taxes rise, so stay in the market short ETF, SDS:US. It is up by 56% since we recommended it on 15th November 2007.
- Short the U.S. financials. With the federal debt burden rising (see point one), and with taxes rising and thus depressing the stock market (see point two), banks cannot "blossom", can they? The excess supply of goods is set to intensify. Investment implication: keep buying the market short ETF on financials, SKF:US It is up by 92% since we recommended it on 23rd March 2008.
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