10 for 2010
This week, as the countdown to the New Year begins, we present 10 themes to watch in 2010.
Rising Fiscal Pressures
Global Monetary Policy
Health of Global Financial Markets
Recovery From Housing Busts
Capital Flows to Emerging and Frontier Markets
Energy Supply Issues
The U.S. Dollar
4 Responses to “10 for 2010”
I am absolutely thrilled about the US markets closing the year the way they did.In the last few days I re-did what I first intended to do the day before T day. I liquidated most long/short equity positions. I now have 15% in four stocks: PG T VZ PFE. I also have a new bearish position: VXX, I invested an agressive 10+% in it. I found out about it in barrons last week:INTERVIEWShorting the Economic RecoveryBy ROBIN GOLDWYN BLUMENTHALA Q&A WITH KEVIN DUFFY AND BILL LAGGNER: Two hedge-fund managers predict the economy’s next leg down. Shorting Goldman Sachshttp://online.barrons.com/article/SB126167812677704659.html?mod=BOL_hps_mag#articleTabs_panel_article%3D1Duffy: It’s difficult to know. It depends on how much money gets printed. In real terms, can we get cut in half from here? We think so. S&P earnings are distorted because of accounting changes for banks and brokers; if banks were marked to market, S&P earnings next year could fall to $45 a share. Bullish sentiment is rivaling the 2007 top, and volatility has fallen dramatically. We like the VXX, an exchange-traded note that’s based on S&P 500 short-term volatility as measured by the VIX index. It’s down 67% this year, and fits into the whole idea that complacency is very high.Indeed. Are there any sectors of the market that you do find attractive?Duffy: We are long consumer staples, discount retailers and pharmaceuticals. One way to participate is through the Gabelli Healthcare & Wellness Trust [ticker: GRX]. It holds roughly half health care and half global consumer brands in high-quality names like Danone [DA], Nestlé [NSRGY] and CVS Caremark [CVS]. It trades at a 20% discount to net asset value, though it has a fairly high expense ratio of 2.16%. If you look at Big Pharma, during the tech-stock and growth bubble of 2000, these companies traded as growth stocks, with an enterprise value to annual research and development spending of about 50 times. Today they’re trading at 10 to 15 times. We like fallen growth stocks that are cheap, like Wal-Mart Stores [WMT]. The stock has gone nowhere in the last decade, but gross profits have grown 2.7 times.What are your other themes?I did go long VXX but sold NSRGY yesterday which they are long. Just a matter of risk reduction/housekeeping.I am also about 5% short the Euro against the USD via EUO. I did get rid of all other ultra short ETFs. I was too early on those but the time will come.So in summary:15% in four stocks: PG PFE VZ T (nothing highly special in these. I kept VZ and T waiting for thr 1/7 dividend. PG and PFE I have a large capital gain that I want to take next year instead of this one.11.5% in VXX2.5% in EUO (remember is an ultra short)30% in 5% 10 year insured CDs41% cash.Finally, my return for the year was 12.83% which was very close to the 12.88% I got in 2008.Happy new year yo all. Hope it brings you Health, Love, and money in that order.
Happy new year to you too Octavio. Always good to hear from you.
Thanks for the update Octavio. I find your investment insight very valuable. I have followed a couple of your trades after some of my own research and have always gone positive. Still in TBT (bought in at under $37 – sold some at $53 a few months back).Happy New Year all!
I am glad it has worked for you. The key is doing your own DD and knowing you cannot win them all; so switching gears fast if something is not working is very important.For example, my recent shorting venture into TWM, EEV, XFP, SRS, SKF and others didn’t work. It was too early; but I limited the damage to a 1% (i.e., 100 basis points) of my performance by stopping my losses. Time will be right again later. I could have stayed short and eventually come out ahead but I don’t like to rock the boat too much at the end of the year.Investing performance should be optimized as a continuum. By getting light at the end of a good year I am sure I am hurting long term performance but that is the way I am:-)