Scarecrows and equity markets

June 21, 2010 - PRLog -- Money is still being given away for free. Trillions of it. Not to you and me, and certainly not to anybody who really needs it, but the vampire squids of this world, the Goldmans and Schmoldmans, are rolling in dough.

Technically bankrupt governments, including most in the EU, the USA and Japan can still borrow long term at slightly above 3% p.a. even though nobody would seriously expect them to ever pay back their mountains of debt. Like all Ponzi schemes this also will end in disbelief and speechless anger.

Why is money available so cheaply to the privileged? Because they've messed up big and now everyone is scared. Talk about scarecrows: US house prices collapsed, banks nearly followed, states are in a hole, inflation is coming ... or was that deflation?

Pensions are not safe any more, and so on. No wonder we're running scared. Should we invest money in the stock market? The Dow is where it was 11 years ago ( "Nice to see you again!" ).

Many markets are far below that. Currencies? Will the dollar reach parity with the euro or head into the opposite direction and collapse? Straight-faced "experts" are arguing either way and make split-tongued snakes look good in comparison. Is gold going to 2,000 or 5,000 or is it in a bubble?

Nobody recommends bonds, except the deflation crowd which is still buying them. What kind of life is it where you work hard for so long - just to see your assets melt away under your eyes, taken by financial shenanigans and inexplicable events?

If you like out-of-favor companies and hold enough cigarette stocks already, may we suggest BP? There is definitely no more despised company available right now. Our opinion is that it will survive, if necessary by letting its North American subsidiary go bankrupt. Other oil companies are also worth a bet, because oil prices are going up again.

Drilling new wells has definitely become much more risky and expensive, thus restricting the future flow of the devil's ink. Coal and uranium are also interesting commodities. Despite being a crowded trade, we're still riding on the gold train; not surprising, given all the cynicism around.

Equity markets remain interesting, to say the least. Despite going nowhere, they are tossing and turning and offering good opportunities for traders. The Bernanke put (the fact that Helicopter Ben is a confirmed Keynesian and money printer) is in place and should limit the downside. The movements, though, are stomach churning. What if you can't handle it? In that case big pharma would like to hear from you.

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XAM Capital Ltd. does investments for a small-circle of friends and family and is meant to serve participating investors with current price information and an outline of our investment strategy. For more information, see http://www.xamcapital.com.