Macro Tsimmis

intelligently hedged investment

BUY iShares S&P Global Energy Sector Index Fund (IXC—again)

Posted by intelledgement on Thu, 07 May 09

In a world where rising energy demand outstrips supply, the macros dictate being long energy, as we said back at the inception of this portfolio. Tactically, we dropped the position when we entered the storm shelter last year. We are reinstituting our position here not because we think the storm has passed, but because while in the eye of the hurricane here, the market is making a serious move northwards and—just in case we are wrong about this recovery having legs—we are protecting ourselves against that risk.

We are still in a downward trend, and there are still shoes overhead but for now, the sun is peaking through so it’s time to make hay. The stress test results whitewashing the banks seem zany to us, but the market is seeing everything through rose-colored glasses just now. We could be seeing a replay of 1933-37 when, starting within a few months of the inauguration of the new administration, the market rallied furiously, even though the depression was far from over. If the speeded up 21st century depression-related market collapse lasted 21 months as opposed to four years (1929-1933), then this false dawn, which lasted four years back in the thirties could persist for up to two years here. We doubt it, but the risk is significant enough to be positioned appropriately.

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