Opinion: 2010 investment outlook

In a word- bleak, but that’s not to say hopeless. If you’re of the opinion that our economy is a ship without a rudder, and/or that chaos reigns in the captain’s quarters, I may have found a life jacket.

As I see it, there have been two major developments lately, neither of which should be a surprise to anyone. 1) The government has involved itself up to it’s eyebrows in the economy, and 2) the rest of the world is getting nervous about the debts that their involvement has produced. This tells me that two major trends for the coming year are the necessity of the government to sell treasury bonds and for the rest of the world to avoid buying them. Increasing supply and decreasing demand dictate that prices will rise.

Believing as I do that the economy is heading down again, I’ve been looking at shorting the market for the last several months, but have found very little of any interest. Most short ETF’s (Exchange Traded Funds) have charts that look like this:

short financials
Not much to go on there. A chart like this can mean one of two things; either it’s a ground floor opportunity, or it’s going nowhere. I tend to go with the latter. Until there is some positive price movement, there’s no reason to tie-up any money in it.

Short ETF’s on 20-30 year treasury bonds have risen in the last month.
20+short treasury

Notice also that the 50 Day Moving Average (DMA) has gone positive against the 100 DMA. The 7-10 year notes have a similar pattern.

7-10short treasury
I don’t make recommendations, but I will be putting my money where my mouth is. As I’ve said from the beginning, there are two ways to reduce debt, either by choice or necessity. With little or no government reform in the offing, 2010 will be a year of necessity.

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