Consumers have been struggling as lending stopped, foreclosures continued, and saving replaced spending. Even through all this, discretionaries led the pack in 2009. Looking forward into 2010, why should investors not continue to stick with them? As holiday sales impressed, there is no reason why consumer discretionaries cannot continue to help lead the market back to its highs.
Borrowing decreased for a 10th consecutive month as banks are still unwilling to lend and consumers unwilling to use plastic. No one would have expected discretionaries to perform so well with consumers not spending. As the economy rebounds and unemployment decreases, discretionaries are something to look for. With the large increase in valuation before spending even started to recover, this sector looked largely overvalued. This week's holiday sales numbers showed a reason to be optimistic.
Holiday sales and December sales were both up compared to last year. This should only be expected as last year we were in a recession and this year we are not. The overwhelming majority of retailers posted gains as inventory was cut and promotions ran rampant. We can only expect this to continue moving forward through recovery. Given the ability to increase sales during the strenuous holiday season, discretionaries are something to look at to make cash money in 2010.
Saturday, January 9, 2010
Thursday, January 7, 2010
Currencies and Commodities Part 2
Currencies and Commodities Part 1 discussed how the dollar is affected by the deficit and interest rates. We can expect the dollar to remain considerably low for the first half of this year as the deficit remains high and rates remain low. It is the second half of the year that we need to keep watch for.
Gold has been on a tear. As the dollar depreciates, gold is seen as a haven. Prices soared to $1200 an ounce before stepping back as the dollar rebounded. Mining has been a positive side effect. Cash money was made in precious metals and mining as gold soared. We can expect this to continue as long as the dollar remains weak.
Oil and agricultural commodities are supposed to continue to do well in 2010. These are also considered hard assets that can be used as a hedge against the dollar. Unlike gold which will falter as the dollar strengthens, these commodities should continue to rally. As GDP recovers in the emerging markets, demand for these will follow.
In summary, the dollar is weak and looks to be under pressure for the first half of 2010. It should begin to strengthen as an increase in interest rates become more prominent. Gold, oil, and other commodities can and have been used as a hedge against the dollar. As long as the dollar remains weak, cash money can be made be investing in metals, mining, energy, and agriculture as many investors suspect. However, the surge in agriculture should continue as demand around the globe for food increases. Invest accordingly.
Gold has been on a tear. As the dollar depreciates, gold is seen as a haven. Prices soared to $1200 an ounce before stepping back as the dollar rebounded. Mining has been a positive side effect. Cash money was made in precious metals and mining as gold soared. We can expect this to continue as long as the dollar remains weak.
Oil and agricultural commodities are supposed to continue to do well in 2010. These are also considered hard assets that can be used as a hedge against the dollar. Unlike gold which will falter as the dollar strengthens, these commodities should continue to rally. As GDP recovers in the emerging markets, demand for these will follow.
In summary, the dollar is weak and looks to be under pressure for the first half of 2010. It should begin to strengthen as an increase in interest rates become more prominent. Gold, oil, and other commodities can and have been used as a hedge against the dollar. As long as the dollar remains weak, cash money can be made be investing in metals, mining, energy, and agriculture as many investors suspect. However, the surge in agriculture should continue as demand around the globe for food increases. Invest accordingly.
Wednesday, January 6, 2010
Currencies and Commodities Part 1
Currencies and commodities are more entwined than most people think. With a lot of optimism toward energy and commodities for 2010, I think its only right to see why exactly these are the trades of the year. We will start with currencies to get to our current situation. Later we will follow up with commodities and the potential trades to make cash money.
The US Dollar had been on the fall before strengthening over the past month. I think we can contribute this to record deficits. Deficits affect currency markets more than anything else. As we saw stimulus, healthcare, and financial plans and bailouts roll out, the dollar took a hit as the currency depreciated. Going forward, if we are able to reduce the deficit, the dollar could continue to strengthen. Until then, corporations should benefit as a cheap dollar summons foreign investment and sales.
The more important factor is interest rates. The dollar kept falling as interest rates started to fall at the end of 2007. It continued its descent until the rest of the world started feeling the global recession as they too decreased their rates. This led to a rally in the dollar. As interest rates have remained at all time lows, the dollar has begun to fall again. It only rises amid talks of an interest rate increase. Looking ahead, interest rates are not expected to rise until Q3 at the earliest.
Gold, oil, and other commodities have been rallying and are expected to lead the market next year according to most investors. As interest rates remain low and account deficits remain high, we can expect this to occur. The only risk lies with any interest rates increases. I think we can put any reductions in the deficit on hold until the economy turns back around. Any economy is an economy to make cash money. You just need to take what is thrown at you and exploit it.
The US Dollar had been on the fall before strengthening over the past month. I think we can contribute this to record deficits. Deficits affect currency markets more than anything else. As we saw stimulus, healthcare, and financial plans and bailouts roll out, the dollar took a hit as the currency depreciated. Going forward, if we are able to reduce the deficit, the dollar could continue to strengthen. Until then, corporations should benefit as a cheap dollar summons foreign investment and sales.
The more important factor is interest rates. The dollar kept falling as interest rates started to fall at the end of 2007. It continued its descent until the rest of the world started feeling the global recession as they too decreased their rates. This led to a rally in the dollar. As interest rates have remained at all time lows, the dollar has begun to fall again. It only rises amid talks of an interest rate increase. Looking ahead, interest rates are not expected to rise until Q3 at the earliest.
Gold, oil, and other commodities have been rallying and are expected to lead the market next year according to most investors. As interest rates remain low and account deficits remain high, we can expect this to occur. The only risk lies with any interest rates increases. I think we can put any reductions in the deficit on hold until the economy turns back around. Any economy is an economy to make cash money. You just need to take what is thrown at you and exploit it.
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