Saturday, December 29, 2007

Update

I'm back! After a harrowing three months my computer woes are finally over. Long story short, I sent my notebook to HP TWICE for repairs and as far as I could tell, they did nothing more than twiddling their thumbs. Finally I was able to reach someone higher up on the command chain and was able to get a replacement. My new notebook arrived the day after Xmas. It has updated specs which partially compensates for my lost time.

I owe a big apology to my readers who have put up with all these. The good thing is that this episode is finally behind me and I plan to resume blogging on a more regular schedule.

Portfolio update

I wasn't able to update my portfolio in the past couple of months. There will be a summary with more numbers as soon as the year's over. With one more trading day left, my actively managed portfolio stands at +17% for the year. The asset allocation portfolio is at only +4.6% which drags down the overall performance to +11%. I'm still quite satisfied considering that the S&P will probably end up in the mid single digit.

Economic Outlook

The traders at InTrade.com are pegging the possibility of a recession at just below 50% which is not that much different from main stream economists. After calling for one for much of the year, I'm now rethinking my position. The problem I have is with the technical definition of a recession which is two consecutive quarters of negative real GDP growth. However, since inflation is to be back out of the GDP figure, an understatement of inflation amounts to an artificial increase of GDP growth. With the Fed opening up the money spigot, it's likely that we'll have a "growth recession" -- something feels rather painful along with a GDP growth of 1-1.5%. To non-economists (presidential hopefuls excluded), the difference is a matter of semantics. Despite this minor waffle, I still believe a mini-bear market is likely, i.e., a decline of 20% from its peak in the stock market.

I've been a faithful follower of Don Coxe, Chief Global Strategist at BMO Nesbitt Burns. I never missed his weekly conference calls up to when its access became restricted to BMO clients. I think the web cast has again become available but haven't found the link yet. At any rate, there is an even better way to hear his thoughts as the transcripts are now available at BeEarly.com. I'll leave you with an excerpt from his Nov 23 call.

... My view is that as I've been telling you all year I believe that the agricultural commodities are much more attractive than the base metals. The base metals are the most cyclical of the commodities. But in order of attractiveness it's precious metals, agricultural, oil and base metals are the stocks that are least attractive. Having said that I wouldn't want you to sell any of them, because if we do have a recession these stocks are not going to collapse because they're just going to be bought out by other well-heeled commodity companies.

As you can see, I share much of his views (more precisely, you can say that I learned much from him.) In coming days, I'll try to flesh out the details of my thoughts, especially regarding gold. I'll also try to do something like predictions for 2008. Stay tuned and Happy New Year to all!