Random Thoughts: 1 May 2008
With the recent strength of the American dollar, I am ambivalent toward commodities in the short term. Longer term, I remain a steadfast bull. If you look at the Bloomberg Commodities Chart, you note that commodities recovered nicely after their dip and have dipped slightly again. If, as everyone believes, the U.S. dollar continues to rally, then commodities will suffer. In my view, however, the important signpost is what happens as we enter the second half of the year. Is the worst truly behind us, or does the worst remain ahead of us?
My own view is that we have yet to experience the worst. If I am correct, we should see further strength in commodities, particularly precious metals as well as oil and gas.
The severity of this recession is difficult to anticipate. On one hand, the jobs numbers do not look too bad yet. On the other hand, economic weakness persists because of all the headwinds of high energy prices, falling house prices, tight credit markets, and increased uncertainty. So we just need to let events unfold and react accordingly.
Given my ambivalence toward commodities, have I lightened up on oil stocks? I probably should but have not yet. While oil prices are coming off their recent highs, I remain bullish on oil and remain unconvinced that oil will fall much further. With regard to gold and silver, I am keeping my gold and silver related stocks. In short, I am in a holding pattern.
My photograph of the Bow River with the Rocky Mountains in the background is hosted at Flickr. If you click on the picture, you will be taken to my Flickr account where you can see more pictures.
