Bearish On Oil, Bullish On Gold

Today, SFOT would like to venture into the macro world and share some of his views(some of which he does have a position in).
Stocks: Bearish
From a very simple standpoint, if earnings outlook is negative, dividends are getting cut and hence yield is less attractive, global trade slowing, GDP globally being slashed down and the end of recession not in sight (economists are even pushing their forecast further out), SFOT cannot bring himself to believe in any sort of sustained rally.
Gold: Bullish
One of the most technical and flow driven asset class to trade. SFOT still believes in the store of value use of Gold, and its traditional use as a form of inflation hedge. The opportunity cost of holding Gold is next to nothing with rates at zero and other asset classes not providing any better returns( unless you have managed to capture that 50% bounce from financials every other month).
Oil: Bearish
Spread bearish, own puts, more in the short end, and will sell spreads into strength for reasons discussed in the past few weeks from inventories, demand, and financial flows. The baltic dirty tanker index below shows
freight rates for crude has collapsed to multiyear lows. That said, tankers are very cheap to hire for storage space and it seems that the floating storage is beginning to build again in crude oil. Refined products are the ugliest in terms of inventories on water and the low freight rates will probably help give some ‘fake’ demand when physical guys take advantage of the contango to buy materials for storage.
By: Chris_Vermeulen

By SFOT on April 7, 2009