May 9, 2009
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
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
As a possible investment vehicle, I mentioned the
Proshares Ultra Basic Materials ETF.UYM.
Here's its chart:
The chart for the Proshares Ultra
Real Estate ETF URE
looks like this:
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.