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OIl:$80, DOW:10000: What's next ?

As predicted exactly 2 months ago oil has reached $80 and DOW has crossed 10000. So what is next prediction over next 3 to 6 months ?Also as 2009 is coming to end, it is time to make some year end macro predictions and then identify if any investments worth considering at this point:

So here are some macro predictions for next 3-6 months:
  • Oil would continue to trade around $65 to $90 with more bias towards $90 due to upcoming world GDP growth prospects. I won't be surprised if oil crosses $90 at least once in 2009. Natural gas also doubled since it reached 7 and 1/2 year low of $2.50. NG could also cross $6 in next 3 months
  • DOW would continue trading waters around 10000 and S&P around 1100. Once investors digest all Q3 results, they would be looking forward to how all important shopping season shapes up. Companies would have to start showing top-line revenue growth in Q42009 and Q12010. If Q4 also turns out to be as good as Q3, we could see DOW touching 11000 in next 6 months. If not, be ready to wild ride back to 9000 or even below 9000
  • Tech companies keep on surprising market with excellent results from Amazon, Microsoft. They should benefit from long-pending upgrade cycle and holiday shopping season
  • Energy and commodity sector would continue its upward trend due to BRIC growth alone. Looking at some of deals in last week (HTE getting acquired - this was one of my weekly recommendation)
  • Now that most of the world stock indices have gone up by 60-100% in last 7 month, it is time to move some of the gains in fixed income mutual funds. e.g total bond index ETF from Vanguard (BND) could offer good way to protect gains and earn some income along the way
  • Regional banks - they get hammered due to heavy exposure to real estate loans especially in Atlanta and Florida areas. Is it good time to bet against the market and make some "survival" investments. I think YES. My this week's recommendation is one such regional bank:
Company: Synovus Financial Corp (SNV)
Buy Price: $2.60 to 2.80
Target price in 12 months: $ 4 (50% return)
Background: Check Google Finance for all financial details
It got 20% hair-cut on Friday due to its loss in Q3. Management has been very aggressive in writing down value of its
loans which should be good in future if company survives. It recently raised $600 M at $4 per share. People who
invested $600 M must have done their due diligence about survival of company in long-run. I see this as almost
repeat of Regions Financial (RF) which also raised capital at $4 per share and now it is near $6. I won't be surprised if
we hear news that someone like John Paulson (hedge fund manager) starts looking at this
Disclosure: I have investment in SNV

Last week I could not post weekly blog due to Diwali festival. We had party at our place with fire-works and all.

Have a great weekend !

/Shyam

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