The numbers coming out on everything are just staggering, no matter what you're looking at -- jobless claims, housing starts, housing price declines, commercial real-estate values, vacancy rates, auto sales, etc. Just look at the news headlines I highlighted in my last post. I don't think people really realize just how incredibly bad the data is. I don't want to be a doomsdayer, but all signs are pointing to things getting worse before they get better. Everything I could want to say on this and more is captured in Eric Sprott's latest Markets At a Glance article. Please read it and re-read it:
Eric Sprott's Markets at a Glance - Dec. 2008: "Surviving the Depression"
You didn't read it, did you :) Go back and read it...
So the U.S. is screwed, but what about here in Calgary? With oil at all-time crazy prices, our oil industry here has kept salaries and spending high. But oil has dropped from $140 to $40, Oil & Gas companies are halting tons of projects, we're starting to hear the stories of the lay-offs, and the construction boom has ground to a halt. The problems in the U.S. will also eventually affect us, but no-one knows how much. So we are definitely going to start to notice a change here. Housing prices here dropped 14% in 2008, and we all know that a house is still pretty much unaffordable if your family isn't making $100K+. I cannot see anything but house prices in Calgary dropping further in 2009. If you're looking to buy a house, I'd wait another year. If you own a house, there's nothing you can really do and I wouldn't stress about it. If you have a good job, don't expect a raise, but be thankful for your job.
Investing -2008
In 2008, world markets fell by an average of 45%, the U.S and Canada by about 35%. I was concentrated in gold and energy stocks through Sprott mutual funds, which were hit very hard, and so I lost about 50% this year. Losing half of your life savings is still really tough for me to accept. While my Sprott investments were making about 25%/year the 5 years before, this now brings that down to an average of only 8% per year over the last 6 years.
The past 10-year return for U.S. market indices is slightly negative, and Canada is slightly positive. In other words, if you're a typical investor who started investing in the stock market 10 years ago, you've basically made nothing over that whole period!
As for my stock trading that I started doing again in October, and which this blog is mainly about, it's been mixed for me. For my small trades, mostly of SSO, DIG, and UYG/SKF, I averaged about a 12% gain over the last 2.5 months. Not bad, but nothing to brag about.
My biggest investment though has been in oil, via DXO. My average purchase price is about 3.68, and DXO is currently at 2.55. I bought in way too early as oil was dropping and now am suffering the consequences -- I'm currently down 30%. I will only break-even with oil around $55, and oil is currently at $43. Just a few days ago oil was down to the low $30's and DXO hit $1.80. I so badly wanted to buy more, and I would've made a killing in just a few days, but I had already spent all my money. I'm just going to have to wait it out.
Investing 2009
So what's the plan for 2009? I have no idea what I'd recommend to anyone. The thing is, the markets are often irrational. I think the economy is only going to get worse, but the markets could stage some big rally after dropping so much, no matter how little sense that makes given the current economic data. So I have no recommendation on what to buy or sell. For me, I'm just going to try to play the swings in the market.
Long-term I think oil, gold, and agricultural commodities will do well, at least preserving their values if not rising, so the ETNs for these might be a safer place to be than the general stock market. You can read my past posts on why I'm mainly moving into oil (DXO).
I guess that's about all I have to say, so good luck to everyone in 2009!
