Hi Traders. I hope this holiday season has been a good one for all and that the new year will bring lots of profit opportunities!

I always try read as much of other people’s work as I can and see what analalyst, economists, traders and bloggers are saying. The end of the year is a great because everyone is writing summaries and it basically condenses their analysis into an easy to read high-level overview and they mostly talk about the most important events of the year.

Some of the most significant economic significant events of 2009 (in my opinion) include;

Support from the Fed is unprecedented.

• the dramatic and unprecedented boost in support from the Federal Reserve (Mr. Person of the Year himself) back in March;
• the bottoming of US unemployment which I believe to be taking place right now (Nov data shows only 11,000 jobs lost compared to an average 135,000/month for the prior 3 month period)
• the beginning of the slow and painful recovery in the US housing market;
• the beginning of the major rally in commodities. While oil wil lead the way in the medium term, other natural resources will outperform in the longer term;
• the beginning of a new monumental shift of sovereign wealth to the east (ie:Asian markets and other emerging economies.) and the subsequent bull market that these countries will enjoy for decades to come.

While I believe that emerging markets are full of opportunities, US markets still have promise. As mentioned in previous articles, smaller commodities producers are acquisition targets and are the best way to play commodities right now. There are already many public companies that show great potential for a buyout and 2010 will surely be a year of IPOs.

I want to keep my summary simple and I do not have a lot of material to refer back to since this is a relatively new site.

On another note, I read an article the other day which I found most interesting. What was basically said was that the rally of 2009 was mostly due to short positions being covered, that we have been stuck in deflation and that the Canadian stock market outperformed the US stock market because of it’s natural resource exposure.

Very interesting… Claiming that a 9 month rally in the broad markets is due to short covering is simply ridiculous, enough said about that. Claiming that we have been stuck in deflation despite the statistics showing that prices have increased for many goods does not make much sense either. Even the home prices have risen, albeit slightly, by 2.4% since October 2007.

Lastly, the fact that Canada is a natural resource-based economy does not mean that it will benefit from a rally in the natural resource market. The US is by far their largest trading partner and a real recovery needs to happen south of the Canadian border for Canada to truly benefit from their exposure to natural resources.

A Rio Tinto mine in Australia.The country that is best positioned to benefit from this commodities boom is Australia. Right next to Asia and producing many key commodities such as agricultural products, gold, oil, metals and minerals, Australia is a natural resource powerhouse and their currency is testament to their economic strength. 

The article was written by the former chief economist at Merrill Lynch. No wonder they missed the sub-prime mortgage crisis and went under.

Stay tuned for more and Happy New Year!