May 20, 2009
again, the indices rose smartly, only to fall back later in the day when
the minutes of the last Fed meeting revealed that the Fed governors don't
see a full recovery, with five years or more before unemployment falls
below 5%. Federal Open Market Committee members aren't worried about
inflation or deflation. They're still forecasting a weak rebound in the
latter half of 2009.
8,422.04, and the S&P 500 doffed 4.66
to close at 903.47. Oil
hit a six-month high of $62.10
a barrel, while gold
an ounce to $937.
Of course, rising oil prices bring the threat of stagflation, while
boosting the prospects for alternative energy.
OPEC has been pushing for $70-a-barrel oil
.The VIX rose
I've become uneasy lately regarding emerging markets,
and particularly, the Chinese marketplace. Their indices have risen a long
way since last October. They're still only about halfway back to their
2007 highs, but the Chinese market was in bubble territory in the summer
of 2007. Chinese investors were arguing that the Chinese government
wouldn't permit the Chinese stock markets to tumble before the Beijing
Olympic games in July, 2008, but they tumbled, anyway. The Chinese markets
have not-quite doubled since last October's lows. (FXI fell from a
dividend-adjusted high of $68 a share on October 31, 2007, to a low of $19
a share on October 27, 2008.) There have been articles this past week
about the heavy cash inflows to the Chinese and emerging markets. Usually,
when you begin to read about heavy cash inflows to a marketplace, it's a
signal that a top is at hand. And it's not as though we didn't have other
compelling choices. The recession, coupled with the fall in the price of
oil, has adversely impacted alternative energy stocks, giving us an
opportunity to stock up on such stocks. What's intriguing about
alternative energy is that it has room to romp. Alternative energy sources
account for only a fraction of a percent of all energy sources. Meanwhile,
alternative energy sources are only getting cheaper and better. Sometime
soon, these stocks will take off again. (Over the last two years,
Suntech--STP-- has hit a high of $90 a share and a low of $5.09 a share.
It's currently trading at around $16 a share.) I'm more comfortable
buying alternative energy index funds than I am individual stocks because
I could imagine it being hard to know which companies will survive
shakeouts and which areas of green energy will show the biggest profits.
For example, in addition to a number of competing technologies such as
solar thermal, smart power grids, energy conservation, and saltwater
algae-based biodiesel, there are uncertainties over which companies will
actually survive various shakeouts. For example, once a sizable market
develops for alternate energy, companies like GE and BP might muscle into
the marketplace and stomp pioneers like Q-Cell and Vestas, or at least,
runners-up like Suntech and Gamesys. Consequently, I'm inclined toward
such ETF's as the PowerShares Wilderhill Green Energy Technology Fund,
the Claymore/MAC Global Solar Energy Index ETF, TAN,
and the First Trust ISE Global Wind Energy Fund, FAN.
All three of these funds have plenty of headroom.
More about this tomorrow.