John Rutledge finds investing akin to... meteorology, and I wholeheartedly agree with him, this excellent analogy allows us to portray a global backdrop of meaningful events and their interactions, which is quite helpful in the discovery process of investment opportunities.
This is the ongoing weathermap of global events as he sees them; any difference in pressure or temperature, or any change in the conditions, may allow us to ride a profitable arbitrage storm:
John Rutledge Investment Weathermap
As I've mentioned in previous posts, I feel one should still be long commodities and assets in general... a storm created by the additional injection of liquidity into global markets arising from the unavoidable slowdown of the US economy... too much paper following the same assets.
But, there are evidently some select sectors in the equities markets which should also perform well; starting with those which are taking advantage of Chinese low wages or markets, and, of course, companies which own... the mines or wells.
These are the themes that I use to develop investment strategies.
Midterm Elections will be especially bitter this year, freezing productive policy initiatives in their tracks. Watch out for destructive protectionist, price control, and windfall profits tax measures that could undermine growth and equity values.
Fed Pause. After raising the Fed funds rate target 17 times since June, 2004 and driving the ten year Treasury yield to 5.3% the dramatic pullback in home prices convinced the Fed it was time to stop raising rates at their August meeting. Bond yields quickly fell below 4.8%. Cooling inflation numbers and growth worries should keep the Fed on the sidelines through yearend.
Telecom. There is still a small chance that Congress will pass telecom legislation this fall. If they do, look for an avalanche of capital spending on telecom equipment to build new high-speed networks. This would be good for tech stocks in the short term and make US companies more productive and competitive in global markets.
Persian Gulf. Short-term, tight world oil markets will keep all eyes on the standoff over Iran’s nuclear program.
Asian growth; US Protectionism. China will continue to grow 8-10% per year through the 2008 Beijing Olympics. The opening of China’s capital markets by the end of this year means increased opportunities for US financial firms to invest there and increasing instances of Chinese companies acquiring US firms here. Expect continued high returns for China’s suppliers—Korea, Taiwan, Hong Kong, Singapore, New Zealand, Australia, and Japan. Watch out for growing demands for destructive protectionism in the US.