Daily Investment Interpretations

May 9, 2009

2009-5-9:  The Capitulation of the Bears
    Well, here we are, with a recovery in sight, with green shoots sprouting all over, and with the stock market continuing to rise. Now what? (
Please note the updates in the column on the right.)
    Don't look now but the price of gasoline at the pump has been rising. And the reason it's been rising is because the price of oil has been rising along with the prices of other commodities. And the reason commodity prices have been rising is because (1) the commodity markets are anticipating a recovery, and (2) the Chinese have been using their dollar reserves to buy up commodities at fire sale prices to take advantage of commodities bargains while simultaneously protecting their foreign reserves from inflation.  Or at least, that's my guess. (The Reuters CRB commodity price index (see below) has fallen from a high of, maybe 472, last July to 200 in March to 243.23 at yesterday's close (5/8/2009).)

    Now the question is: what's going to happen to our economic recovery if prices of food, raw materials, and energy start to rise as wages fall? Will this dampen down (stretch out) the recovery?
    Alternate energy projects, derailed by plummeting oil prices and scarce venture capital, may now take off, particularly as the alternative-energy incentive programs enacted by the U. S. and Chinese governments take hold.
    The dollar may fall again.
    The long-awaited market pullback may occur as pundits question whether this economic recovery is durable or is a false dawn.
    In the meantime, it's time to get serious about restoring the investment capital some of us have lost during this economic debacle.
    As a possible investment vehicle, I mentioned the Proshares Ultra Basic Materials ETF.UYM. Here's its chart:
Chart for UYM
       The chart for the Proshares Ultra Real Estate ETF URE looks like this:
Chart for URE.
    There's no telling how long it will take real estate to recover, or how far it will come when it does, but there's a lot of ceiling space available for this ETF when it finally does happen. 
    For more discussion of what to do next (or at least, what I plan to do next), please check
How might I realign my investments to recoup my losses now that the markets are starting to recover.