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1. Longs and Shorts, New Years
By Robert Marcin
1:27 p.m. EST
I think there are some interesting one-off longs in the retail and E&C spaces. Computer gaming/software looks interesting after last year's bust due to the lack of hit releases. Related stocks are down and cheap.
Also, I am nibbling at domestic, civil-exposed engineering and construction companies. They have lagged behind and remain quite cheap. I expect more infrastructure spending in 2010, and even an infrastructure-related stimulus package.
On the short side, like Dougie, I am building my small-/mid-cap ideas, especially overbought ETFs. The equal weighted retail ETFs look overbought and exposed to $80 oil and $3+ gasoline. Finally, domestic capital-equipment companies look expensive for the modest earnings recovery I expect. With limited BRIC/commodity/energy exposure, domestic general industrial companies will struggle in 2010.
This year was favorable for Wall Street, though not necessarily Main Street. The Fed policy of reflating asset bubbles and backstopping investors didn't filter down to Main Street. One would expect the Fed/Administration to change course at some point to help employment and small businesses.
I remain quite surprised at how quickly investors reacquired a healthy appetite for risk, despite the many structural problems that remain on Main Street. I believe 2010 will offer more challenges to Wall Street than 2009. Have a happy and prosperous new year!
2. Housing and Rates
By Tim Melvin
1:05 p.m. EST
I see that fixed mortgage rates are rising once again. The 30-year fixed rate has crept back up over 5% to four-month highs. As the long end of the bond market continues to look weak, to me, this isn't good news for the housing market.
We can argue inventory levels all day, but the shrinking pool of buyers cannot be ignored. Without the continued unlimited support of taxpayers to Fannie and Freddie, the pool would be even smaller. Most of the conventional lenders want sizable down payments and high credit scores. There aren't a whole lot of people who can still meet both criteria, since the recession has damaged individual balance sheets and credit ratings. The rising rate could very well cause that small pool of buyers to reconsider moving up at this time.
I see a housing wake-up call coming in the first quarter. It is not as good as some seem to think.
3. We've All Been There
By Doug Kass
12:28 p.m. EST
A heartfelt shoutout to Rev in
his most recent post, in which he soulfully describes some of his disappointment this year in trading.
Being honest with myself and with our subscribers has been of paramount importance to me as well. I try to readily admit my mistakes and, hopefully, I have done so in columns over the past year.
The transparency of
shows our successes and our blemishes. And like Rev, I too have had many of the latter!
Fessing up to my mistakes is high up there in the responsibility that I feel in writing
4. Weight Your Portfolio With Lead
By Howard Simons
12:24 p.m. EST
If the ultimate value of gold is you can bribe a border guard therewith, the ultimate value of lead is you can shoot that same border guard cheaply, then mosey on over to where you wanted to go.
Commodities are not pretty.
And what led the pack this year in commodity returns? Lead. Good old prosaic PB on your periodic table. Up 141.44%, as opposed to gold's 123.18%. We sniff.
But does lead grab the headlines and get invited to the A-List parties? Hardly. It gets to sit in a box of sulfuric acid and start your car. Does anyone go on daytime TV and muse, "What is lead telling us?" Negatory. Does anyone hold up a chart of lead and proclaim the end of civilization as we know it? Do they opine on the lead/zinc ratio? Do they use it to flagellate the dollar? No, no and no again.
Should you get the lead out? Possibly: The monthly Fibonacci chart of three-month lead forwards just bounced off the 61.8% retracement level between the October 1993 low and the October 2007 high of $2,543 per ton (seriously). Further purchases could go over like a you-know-what balloon.
5. Dell Poised to Ride 2010's IT Replacement Cycle
By Michael McDonough
11:14 a.m. EST
Looking ahead to 2010, I believe Dell is well-positioned to take advantage of an approaching IT-replacement cycle that will be fueled through an increase in business confidence and relatively cheap financing. In the third quarter 2009, the software and equipment component of GDP had already risen by a seasonally adjusted annual rate of 1.5%.
This was likely just the tip of the iceberg. Commercial software and equipment purchases tend to rise at a high beta to actual GDP growth during recoveries. Since Dell derives roughly 50% of its revenue through its commercial-business segment, the company should benefit from a wave of IT upgrades.
I should also mention that, according to the company, PCs on average are currently 9 to 12 months older than the historical average, which should add more fuel to the approaching cycle.
Position: Long DELL
This article was written by a staff member of RealMoney.com.