A Winning Investment Theme with Staying Power
— “Ahead of The Street” Column, by Mitchell Clark, B. Comm.
There is enough positive momentum for the Dow to hit 11,000 going into 2010. Once this happens, the bear market in stocks will be over. This doesn’t mean that the market won’t experience another big downtrend; but, as we all know, the stock market is always thinking about the future.
If you’re a trader and you like to buy high and sell higher, one of the best things you can do right now is make lists of those stocks that are hitting new 52-week highs. If the positive trading action in stocks continues, you can make money owning the fastest-growing stocks in the marketplace. Of course, strong risk management is always a trader’s best friend.
I haven’t been too enthusiastic about taking on new positions in this market. My approach to the stock market is usually to try to buy low and sell high. I’m not much of a trader. I recognize, however, that a lot of people do like to trade stocks and this is a lot easier to do when the market has some wind at its back.
There is starting to be a lot more talk in investment circles about inflation and another big push from commodities. I think this is an investment theme that we need to pay close attention to over the next few years. The groundwork has been laid for a price boom in most of the world’s important commodities and I think investors need to have some exposure to this theme if they want to outperform.
Further to this, I think it is increasingly likely that the commodity price cycle will push itself into the agricultural sector and that investors should definitely have some exposure here. If I had to pick one specific way to play this predicted trend, I’d own a fertilizer producer in China. Buying farmland only works if you have a lot of extra capital lying around. I’d also own some gold and silver as well, followed by a basket of commodities in some sort of fund.
Big changes are coming to the global economy and they are related to price inflation. The price of food is going to go a lot higher and so are interest rates. The best thing an individual can plan for now is to get out of debt and invest in commodities. As for the stock market, I just don’t know.