Chris Lau - Seeking Alpha

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Wednesday, August 13, 2008

Watch Gold and Oil

It turns out yesterday's entry on gold proved timely. Gold rallied +$16.90 to close at $831.50. Barrick Gold rose almost 6%. Not a bad profit if one bought yesterday. It seems that bargain hunters are starting to place bets for a rally in the commodities market.


Next, again, for discussion is oil. Is lower oil a good indicator for higher stock prices? What about a stronger US dollar against the Euro? According to Business Week magazine, if oil prices fall, due to lower demand and the Euro weakens, it could only mean weakness in economies outside of North America: Europe and Asia. This is very bad news for international US companies.

Most recently, GDP figures were reported but did not indicate the U.S. was in a recession. Those numbers were supported by strong export demand. Investors will now have to worry about the impact of a weak European economy for US large cap internationals.

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It is important to avoid making comments and observations in short-term directions for stocks. It has been great for day-trading, but the goal of this site is to identify longer term fundamental and technical trends. The site is not there yet.
The trends that can be identified may be summarized as follows:


  • Oil and Gold prices have corrected, but it is uncertain which way they will move
  • Avoid home builder, homes, REITs and anything that has to do with the housing sector
  • Avoid U.S. banks, mortgages finance providers and insurance
It will soon be time to start imagining where the sentiment for consumers will be after the Olympics and during the U.S. presidential elections. Again, I point back to the August 18th issue of Business week. There was an informative article that argued that neither candidate had the power to follow through with election promises (due to the U.S. government debt levels).
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