Disclosure: Short the market through SDS (double inverse to SP500)

Those who talk finance with me know that I have an abiding respect for investor Bill Ackman.  It comes close to man-love, I must admit.  Bill is eloquent, thoughtful, intelligent, well-informed and any other adjective that gives praise.

My first experience reading about and listening to Bill came about this time last year when I was struggling with whether to invest in General Growth Properties.  At the time last April, GGP was entering bankruptcy.  But the market and economy had just begun to turn and I had personal experience with GGP properties and management and thought the company had excellent mall properties and was well run.  I wanted to invest in GGP which was then selling for only $0.65 per share and had a total capitalization only around $200M on a business with properties once valued at $30B.  If it were possible to solve the debt problem at GGP, then the company had an excellent chance of survival.

Enter Bill Ackman into my life.  As I was researching GGP, I came across research that Bill had put together as his hedge fund, Pershing Square Capital Management.  He had done a very thorough job researching GGP and was able to show that with even modest "cap rate" assumptions, GGP would do very well.  All it needed was time to restructure its debt.  Ackman proceeded to take an active role in buying time for GGP, first by offering to provide bridge (DIP) financing (later provided by another party), helping convince the court of the merits of GGPs survival and later by joining the GGP Board of Directors. 

As the year 2009 progressed, Ackman's activism and my confidence in his research proved very profitable for both of us.  I have now exited my GGP investment (much too early) but Ackman, to my knowledge, remains on board and has seen his investment return over 20-fold.  I admire this type of clear vision and the courage to act on it.

Ackman was a noted short trader earlier in his career.  He gained notoriety for his big short position in credit card company MBIA in 2005, for which he was investigated by the now-notorious Elliot Spitzer, then New York State Attorney General.  He was able to demonstrate to Mr. Spitzer his innocence and turned the table on MBIA by exposing the Attorney General their fraudulent practices, the reason for his short position  (presaging the debt crisis to come).  He took a "sow's ear" and turned it into the proverbial "silk purse".  That taxes moxy.  That takes class.

Given his career path and the level to which he has risen, Ackman is very intimate with the inner workings of Wall Street.  He shows himself to be rational and level-headed and has a thorough, first-hand understanding of the arcane financial instruments that Wall Street has created.  So, when he gives his opinion on the Goldman Sachs situation, I listen (much more so than to EF Hutton).  Today as guest host on CNBC Squawk Box, Bill Ackman shared with us his assessment.  He comes down on the side of Goldman Sachs for all the reasons I have provided in the past two weeks, but with the conviction that can come from only an insider.  Here is an excerpt from the show:

Goldman Sachs did not commit fraud and the insurance company that bought the product that is the subject of a government investigation should have known the risks, Bill Ackman, founder and CEO of hedge fund Pershing Square Capital Management, told CNBC Tuesday.

“I don’t believe that Goldman committed fraud,” Ackman told “Squawk Box Europe.” “(ACA, the counterparty to Goldman - Paulson Partners) took their own risks.  "They’re sophisticated investors.” “I don’t think the (Securities and Exchange Commission) has a good case,”  Ackman said.

“Having been the subject of investigation in the past  (for the MBIA case referenced earlier)… I don’t feel sorry for Goldman Sachs, but they’re not being treated fairly (either).”

Not only does Ackman contend that Goldman is innocent of the charges of fraud, as I also maintain, in addition, it would even have been unethical if Goldman had disclosed that hedge fund manager John Paulson was shorting the housing trade to any investors taking long positions, Ackman said.

Ackman argued that sophisticated investors (the German and Dutch bank that bought the long positions from ACA) have the information at their disposal to make their own decisions, and are also responsible for their own mistakes.

“Imagine that Soros and Buffett were on the two sides of this transaction,” he said. “We wouldn’t even be talking about this now.” 

But later in the interview, Ackman states that the true victims are the taxpayers as they do not know they are party to the trade via "too big to fail" and taxpayer rescues.  This is true in Germany and the UK, as well as in America.  It is the taxpayer that has to cover the losses made by overly aggressive bank managers who are playing with OTM (other people's money) in order to win large bonuses.

So, it is not Goldman Sachs that should be taking the fall for the financial crisis, but the bank managers that lost money and the regulators / government officials that are charged by the public with protecting the financial system.  The "witch hunt" that is today's Congressional hearing is completely misdirected and intended to make the Congressmen who failed in their sworn responsibilities, look better, much better, than they really are. 

At the end of this segment, the former SEC general counsel, Simon Lorne, appeared with Bill Ackman. Mr. Lorne offered his highly informed opinion that the case by the SEC against Goldman Sachs is "weak". This is the position I have maintained. The facts will show that there was no "fraud". If anything, there may have been some technical error of omission where disclosure is involved. This might justify a fine of some sort, even a large fine given the stakes involved. But Mr. Lorne says it all much better than me:

Disclosure: I am long GS with October Call contracts; If I could be, I would be short the Congress;

The DOW punched through 11,000 at the open on Monday, April 12 (after moving through briefly on Friday) and the SP500 will possibly close above 1200 today, on Tuesday. If these two levels hold for the rest of this week, then a new psychological floor will be established.

The round numbers like 1000, 1100 and 1200 are easy for most casual investors to remember and relate to, so they do act as psychological barriers, both up and down. The true technicians can find many shades of grey in between those levels, by using various moving averages like 21 day or 100 day and stochastics / oscillators. But the round numbers are the stronger. Once four days pass, the duration defined by IBD's William O'Neil as having some permanence, the barriers become difficult to break down.

With 11,000 and 1200 setting up as new floors, then the obvious targets become the next round number up, 12,000 and 1300. Given continued good news on earnings and revenue growth, even at a slow pace, economic strengthening, and digestion of problems like Greece, those targets will become a reality by year end.

Jim Paulsen and Ed Keon, two very thoughtful and accurate forecasters, believe that the economy has turned a corner and that revenue growth will take up where profits growth has already gone. It has been a lack of "top line" growth that has kept the market in check. Paulsen and Keon both believe the indicators show the economy strengthning. A stronger economy in combination with high "operational leverage" from very trim corporate operations, will be earnings and cash flow rocket fuel if revenue grows significantly the next 12 months.

This throws a big question on the PIMCO "New Normal" thesis. If the economy picks up due to so much government stimulus and a generally strong global backdrop, US GNP could grow above 5% in 2010, which is of the "Old Normal" recovery variety. This would be a big change from where the market currently values the economic prospects and would take the DOW and SP500 up another 10-15% if it proves true.

It is time for my annual financial self-examination.  I do this each year and make my findings public to create personal accountability.  2009 was much better than the 18 months before.  My aggressive total portfolio lost 50% in 2008.  In 2009, I reversed that horrible trend and gained back a good part of what I lost.  And for all of 2009, through Thursday, December 24, I ended the year at +40% (all numbers are Year Over Year), beating the SP500 and FFFDX (Fidelity Freedom 2020) indexes by a considerable margin (+20%, and +14%).  And from the March 7 bottom, I gained 126% (showing just how deep my portfolio had sunk in 2008 and early 2009, -65%).  The only way for those kind of gains is commitment and staying with your long term strategy.  At the panic bottom in early 2009, many were getting out of equities and going to bonds.  They still are there.  My performance was aided by a continuing commitment to commodities, tech and emerging markets.  I also tripled my commitment to high yield (junk) bonds and financials near the generational lows in March, which helped my overall return.   A couple of speculations, such as buying General Growth in April as it entered bankruptcy protection also paid off. 

As bad as 2008 was, it is really the past ten years that have been very poor for investments of almost all kinds.  Those who say we are at the beginning of a multi-year bear market really haven't done their homework.  The Bear began in early 2000 with the collapse of the Tech bubble.  The Nasdaq 100, which was as high as 5100 in March that year dropped below 1100 in October 2002, a collapse that rivals the Dow Industrials collapse from 1930 to 1932.  Yes, the markets recovered (as they did in 1933-36), and the Dow Industrials, really an old-world and narrow index today, did reach new all-time highs of 14,200 in October 2007.  But the Nasdaq stocks barely recovered to 50% of their all-time highs (a classic Fibonacci retracement).  The bubble transferred from equities to real estate in the mid 2000s.   Of course, it was here that historic damage was done over the past two years.  

Given all this, I take some very small satisfaction in being down only an average of (-1%) annually for the past ten years in my overall portfolio.  This is especially true because much of my capital contribution was at the end of the period (2006-07) making the subsequent drop that much more damaging to my portfolio.  During the same ten year period, the SPY (-0.63%) and the FFFDX, a life benchmark portfolio for people retiring in 2020 (+2.23%) have better performance.  I am biased to the optimistic side of investing and comfortable with risk and so have a "higher beta" portfolio than most my age.  But had I seen the 10 year bear to rival the 1930s coming, I might have just left my investments in a bank account.  Hindsight is 20/20 so I am not second-guessing myself, and am happy to have kept up with passive index funds. 

It is a perilous but fun exercise to predict events over the course of a year.  It is impossible to really know the future, but mentally stimulating to give it a try.  And the result helps shape decisions throughout the year.  Here are the Wealth-Ed.com predictions for 2010:

1. The American stock markets will rise by 10-15%, defying the consensus which considers the market to be either fully or over-valued as of December 31, 2009 (too far, too fast).  SP500 will reach 1,270 during 2010 and will end the year close to that level; range will be 9500 - 11,300 DOW; 1020 - 1270 SP500; 1980 - 2490 NDQ 100;
2. SP500 aggregate earnings will exceed consensus expectations of $65-75.  They will finish the year at $85 which will justify a 1,275 SP500 price based on a PE of 15
3. The stock markets will follow the classic pattern of strong in winter and fall and weak in the late spring and summer which is the source of the saying: "sell in May and go away"; it will be a good year to follow that advice
4. The US dollar will strengthen into the second week of the new year and will then fall through the winter months as Treasuries are sold to finance riskier equity investments;  there are a record $8.4 trillion dollars on the side lines in cash, money market and other near money funds (as measured by M2, according to Fed Reserve report H.6); the dollar will drop to $70 DXY by the end of March and then rebound in the late spring so DXY (dollar index)  will exceed $80 by September.  An improving economy and higher Treasury rates will be the impetus for dollar strengthening
5. The Fed will hold short term interest rates low until mid-summer; it will allow long term rates to drift higher and the 30 year Treasury will hit 5% by June;  by July, the Fed will begin to signal its intentions to let short term (Fed Funds) rates increase as the economy continues to strengthen and the unemployment rate finally starts to decrease (first in June); evidence of higher interest rates will push the stock market down and the dollar will strengthen;  the 10 year Treasury (the basis of many mortgages) will finish the year over 4% from a current 3.5%;
6. As the dollar weakens to 70 DXY in the first half of the year, the "carry trade" will re-appear from its Holiday hiatus and weak dollar investments will excel, including Energy, Materials and Emerging Markets; but sell those investments in April as the dollar shows signs of reversing; TBT will be a very good way to play the reversal in the dollar (ultra short the Treasury complex); by October, the shock of higher interest rates wears off and the stock market picks back up with domestic and cyclical stocks taking the lead from the weak dollar stocks of the year's first half; advice: rotate investments away from commodities and towards cyclicals and industrials as dollar strengthens at end of year;
7. Healthcare stocks continue their comeback as the Senate finally gets a greatly weakened bill passed in January.  It goes back to the House for conference and is finalized by the end of March.  The public option is gone but the expanded Medicaid program remains bringing another 30M people onto the public funded program.  Healthcare stocks continue their recovery with more people to receive care in 2010 and beyond; buy UNH, WLP, BDX, MDT, MRK, JNJ and PFE early in the year
8. Gold reaches its peak early in the year at 1400.  Gold bugs are crushed when the dollar strengthens later in the year.   The Fed proves to be much more adept at taking liquidity back out of the market than was anticipated by doomsayers and gold falls back below $1000.  Severe inflation (over 5%) never materializes due to the global production and labor overcapacity
9. Oil prices range between $60 for a low and $100 for a high in 2010; the low will occur in the late spring or early summer as winter demand dissipates and the dollar begins to strengthen with the beginning of tighter money supply, but though "weak dollar" speculation dissipates, the price peaks at $100 as the economy picks up pace at year end;
10. Natural gas outperforms oil as record supplies are reduced and demand begins to exceed supply by year end; gas ends 2010 at nearly $8 per mmcf  propelling the natural gas oriented production companies back to 2005 levels; PWE reaches $30 in late 2010 (was as low as $6.50 in March; I have stayed with this for the round trip);
11. The Republicans gain seats in both the House and the Senate as Independents that voted for change in 2008 are sorely disappointed in what is delivered and vote for economic stability and a balanced budget which the Republican party promises.  Enough seats are gained so that the Democrats lose their supermajority in both houses.  Awareness of this political shift is what fuels the market to new highs from the summer doldrums, starting in October.

Regarding 2009: I was in such shell-shock from the beating I took in Q4 2008 that it was January 3 before I got to my annual crystal-ball adventure.  But predict I did and those predictions are below or by clicking here: 2009 Wealth-ed Predictions.  This will be the ninth year I have made my annual predictions;  the first time in December 2001.   In December 2002 I made a call for the 2003 market to begin a great run starting in March.  I hit that one out of the park and expect to do the same this year.  Looking back at my early 2009 post on the direction of the market, I did prognosticate quite a bit of the year's direction and events correctly with only a few minor errors in timing or magnitude, not direction.

• Government backed interest rates (mortgages and Treasuries) will stay low throughout 2009 (less than 1% for 2 year bonds); but sometime thereafter, maybe early 2010, they will start rising and continue going up as inflation heats up along with an economic recovery. Right - the commitment to easy money by the Fed pushes the normalization of interest rates out to mid to late 2010 now; I never imagined Bernanke would stay this aggressive this long, but am glad he has; 
• By July 2009, the high yield and corporate bond interest rates will begin to decline, narrowing the historic spread against risk free Treasuries; Right - this was my best call in early 2009; the Junk-to-Treasury spread peaked at over 2000 basis points (20%), historic highs; I loaded up on high yield debt (via FAHDX) in March and it returned 70% from there before I began getting out of the fund in October.
• Crude oil will continue weak throughout 2009 in a range of $25 -$60 per barrel; as a result production and exploration will be reduced and lower production with higher demand will set the stage for a rebound to over $100 sometime in 2010 or 2011; enjoy low gasoline prices while you can; Right - on the downside but not on the upside; and right on the general weakness in demand and its impact on supply, which has really dropped (as indicated by active drilling rig count); the peak price  ($83) exceeded my expectations because of excess monetary liquidity created by the Fed that sought out risky assets; still I benefited from this rebound as oil/gas producers via the Canroys, remain one of my largest positions;
• Gold prices will stay under $1000 in 2009, but will not decline under $600; but gold could increase to over $1500 by 2012 because of a weaker dollar caused by inflation from excess money supply created in 2009; Wrong - but for reason of timing as the Fed has been much more successful in creating monetary stimulus than I thought they would; but it is a good thing that there is excess stimulus, some of which ends up in risk assets like gold,; the spike in gold prices also mistakenly anticipates hyperinflation; If the Fed can withdraw stimulus in a timely way in late 2010, they can avoid high inflation, which will stop the gold spike below $1500. (and if they are unsuccessful, the spike can proceed to $3000 the next few years)
• In early 2009, GM will be forced to declare bankruptcy (or an equivalent government reorganization); same for Chrysler; this will set the stage for a revamping of the American auto industry and will usher in a new era of manufacturing competitiveness; Ford will escape bankruptcy, but will benefit from the changed labor and franchise rules; Right - but I didn't think Obama would be as brash as he was in protecting the unions at the expense of bondholders, including individuals and retirees; but given his constituency, I was not too surprised at who he chose to favor;
• At least five major mall retail brands will declare bankruptcy and will be closed; candidates: Abercrombie, Zumiez, GAP, Hot Topic, Lane Bryant, Foot Locker, Eddie Bauer, Ann Taylor; but look for the retail sector to outperform as soon as 2010; Wrong and Right - wrong for good reason that the Fed was more successful stimulating the economy than I thought possible; but the names above are all in deep trouble and would have gone down if not for the Fed actions; support to consumer spending has unexpectedly helped GGP (see next); Right: Eddie Bauer went bankrupt in June, Ann Taylor closed half its stores, Lane Bryant and Foot Locker closed many of their stores, just avoiding bankruptcy;  but the retail sector did better than expected at year end as stimulus got consumers spending again (RTH +17.8% for 2009)
• General Growth may become a victim both due to the above store closings / bankruptcies, but also due to the debt it took on to acquire Rouse Companies; its survival depends on selling several of the Rouse flagship properties: Fanueil Hall (Boston), Harborplace (Baltimore) South Street Seaport (NYC) and its Las Vegas malls (Forum Shoppes, Fashion Mall, Highland Mall); Wrong - but I figured out I was wrong in April and bought GGP at that time instead at $0.65 / share; the key to investing is to stay nimble;  now it looks as though GGP won't have to sell any properties as it exits bankruptcy; I closed my GGP out at $6.60 in early December;
• Official unemployment will top 8%, but will not top 10%; Wrong - even the "official" number could not be kept under 10%, though it probably will not go any higher than 10.5%
• Mortgage rates for 30 year fixed rate Fannies will be less than 4.5% with no points; but these rates will rise in 2010; Right - though credit is so tight that few people can qualify for the record low interest rates; look for mortgage rates to rise once unemployment declines for 3 straight months and as the govt pushes banks to start lending again;
• The stock markets will see a range and return by year end of DJI: 7000 - 10,500 (13%); S&P500;: 725 - 1100 (15%); NASDAQ100: 1400 - 2200 (10%); with the lower end of the range reached in the first half of the year (there will be a retest of the November low, but that retest will be the bottom of a new 20 year secular Bull market, albeit the new Bull will be sleepy for several years while the economy and debt are repaired);  Right - in fact, one of my best calls as I was two months earlier than Doug Kass on my market recovery prediction; I did not forecast the "panic bottom" in early March, but that lasted for only three weeks; I nailed the DOW as it ended up 13.5% for the year; SP500 was up 19% and NDQ100 was up 42.6% (my prediction was 2200 and it is 2210 today)
• The best asset class return in 2009 will be in high yield bonds (junk) with a 30% total return; Right by a landslide; and the returns were quite a bit better if catching the bottom in March as I did (+70% from January, but +90% from March);
• The 2nd best asset class return in 2009 will be in energy stocks, both producers and equipment providers, though producers will have the best total return at 25%; Right - sort of; a close call between Technology (+60%) and Materials (+48%) / Energy (+30%); I lump energy and materials together because they trade in a similar way; they all did well for the same reason, the weak dollar and easy money chasing risk assets (and foreign markets);  my idea of energy for investment are Canroys which did much better than the big integrateds like Exxon that make up the indexes; PWE which I own in a big way, is up 76.8% for the year, dividends reinvested; PVX is up 71.2% and PGH is up 41.1%
• The worst asset class in 2009 will be Treasuries with 30 year bonds returning a negative 20%;  Right - the TLT, which is a basket of Treasuries with an average maturity of 20 years, is down (-24.79%) as of today (December 25) and 30 year is worse;  this trend should continue in 2010 and longer term Treasuries should again be a poorinvestment with net losses over the year; long TBT in 2010 is a good way to take advantage of this future trend;

There has been much hand-wringing over Dubai and other countries and their sovereign debt problems since the end of November.  There is a fear that the exposure of this debt might be the tip of the iceberg.  It is feared that the government debt crisis will spread from the small and traditionally weak and underfunded economies of Portugal, Spain, Greece, Italy and Ireland (the PIIGS) to the more substantial and traditionally strong economies of France, Germany, Japan and the United States bringing with it the fear of a global sovereign debt melt-down.  This opinion is emotional and uninformed

All the "sovereign debt default" talk about Dubai, Greece and Spain is old news that is just now getting press because what was already in motion at the top of the debt bubble in 2007 is finally coming to fruition.  Now that the commercial bank crisis has been for the most part averted, the sovereign debt issues that are closely related come to the fore. The Dubai problems were obvious two years ago or more. And Abu Dhabi and other UAE brethren have little patience for the profligacy of Dubai. They will backstop Dubai only after those who overextended get taken out. Then they will ride to the rescue and take control of many of the assets.

Same thing in Spain or Greece. Spain dug itself a deep hole by committing significant debt to aggressive expansion of public works, most notably the 3GW solar power expansion.  The EU will backstop those countries, but only at a price. It is in no one's interest to let the fire burn out of control. I compare this to hot spots after a forest fire. If they don't threaten to flare up and ignite new fires, you let them die out on their own.  Other times you douse them (with financial liquidity in this case) to put them out before they spread. If the infection spreads to Japan, that would be a much more serious event than Dubai, only because of the size of the Japanese economy and the relative importance of the yen. But I think the global central bank leaders have an eye on this and will prevent a Japanese economic collapse. As long as all major economies pull together, there is no reason to think we will have a financial calamity. Economic collapses require the public to panic (and stop spending). Panic is totally a psychological phenomena and can only be brought about by careless or reckless political actions (or inactions).

It is very important to note that the countries that are in danger of defaulting, are not key world economies. The talk of a major economic power like Germany, Japan or the USA being forced into insolvency is from someone ignorant of what it takes to force a financial default. Defaults don't just happen, they are initiated by a creditor. If the debtor is large enough as compared to the creditor, then it is non-sensical or impossible for the creditor to force the default. The punishment will fall as much or more on the creditor as compared to the debtor. To force a smaller debtor to default, though, makes sense. Assets can be seized and held or resold to recoup the investment. Just who would force the USA, Germany or Japan into default? Who could gain? Who could manage the assets that were forfeited for the debt? There is no private money (hedge funds, ala John Paulsen) with the size to force a large sovereign to default.  China is the only creditor nation with the size to force such a default. But China won't do it because it would be suicidal. China, the creditor, needs the developed world as much as the debtors need China and other developing, export-driven creditor nations. It is totally symbiotic, or co-dependent if one wants to be cynical about the situation.

To make my point about the relative size of creditors and debtors as it relates to default: I just made a good return recently on General Growth Properties (GGWPQ.pk) because I understood this dynamic. GGP was in technical default because of the financial crisis and its inability to roll forward short term debt taken on during the two to three years prior to the financial collapse. It was / is still cash flow positive and can cover the costs of its interest obligations, much like sovereigns with their ongoing ability to raise revenue from tax.  But GGP wisely had filed for bankruptcy as a single entity and had pulled all its various mall properties under the single corporate parent umbrella. This made GGP in effect, too big to fail. No single creditor had the legal power to force all the properties into a firesale. The court (Judge Gropper) saw it the same way and made the decision to force the parties to work out the mortgagtes (to refinance). When the creditors found out they were not going to be able to drive a hard bargain and take away the mortgaged property for much less than market value, they had to deal. Now GGP is close to exiting bankruptcy with all its property intact.

Even though sovereigns are unlikely to default in a cascading way, the global economy still remains weak.  It will take consumers and businesses a long time to regain their confidence to buy and bankers to lend.  For the overall American market, from this point on, the economy must improve significantly to get the SP500 much above 1200. But I think that is the higher probability over the next year or two as compared to a melt-down. Politically, I think President Obama is finding out that it isn't prudent to be too anti-business. He seems to have finally gotten the point that the top priority is jobs. Health care and environment are lower priority since there is no money to pay for them if we don't have near full employment and full tax revenues. We aren't hearing too much health care talk from the Admin or Congress the past 2-3 weeks. To demonstrate his new-found love for business, Obama just had T-Sec Geithner spell out the capital gains tax freeze and investment tax credits for 2010. This will help jump start business and improve consumer sentiment as people start getting jobs.

As Obama and other world government leaders turn their attention towards restarting business, the world economy will heal and the markets will respond. Asian stock markets might be a little overdone just because of being the crowded trade, so I have backed off on them, for now. I have moved almost everything back to domestic large cap stocks or energy / commodities. I think 2010 will be a "consolidation" year with only a little index movement, maybe from 1100 to 1250. 2011 might be a similar year, with gradual improvement from 1250 to 1400. That would get us back to May 2008 which was about where the final dive started (down to 666). Maybe we pull back 100 points (10-12%) somewhere in the next 2-3 years. But by 2014 we can pass 1550 and set new highs, if the government continues to be supportive of business and doesn't get too radical (seems more likely right now than 6 months ago).

I am buying up some of the banks that look like they are turning the corner and will be survivors. I have a bunch of the leveraged financial index, UYG, which is weighted towards the survivors like GS, JPM or WFC. But I also am buying some BAC now (as of two weeks ago). Even Citi might be a buy at this point, now that they have a plan to exit TARP. But I am passing on them for now.

Otherwise, my theme is Tech, commodities, energy and materials. Tech is due for a positive replacement / upgrade cycle after 10 years of being down.  Microsoft's (MSFT) Windows 7 should be the catalyst in 2010 once the IT budgets are approved. Just buy the XLK if you don't have any favorites. SMH is the semicon index which has more beta than the XLK. My favorites in commodities tend to the miners and energy stocks, though I have recently picked up some Potash (POT).  I also have call options on (FCX) and (BHP).  This is a better way to play the weak dollar trade than gold, in my book, as operating leverage contributes to performance and generates cash flow which actually has value to an investor.  They have all outperformed Gold in 2009.  Commodities and Energy will benefit from the global economic expansion that is the natural reaction to the collapse. I find it interesting that Suncor (SU) was going up the last two days while oil futures are going down. I find that a very positive sign. I have really loaded up on Pennwest (PWE) and Provident Energy (PVX) .