5 'sure things' in a wild market

3. Copper

It's really quite simple: A weak U.S. dollar pushes up the dollar price of everything from oil to copper to wheat as foreign sellers rightfully refuse to take less in their own currency.

And the weak dollar has had plenty of help from a flood of cash flowing into commodity markets from traders looking for any haven when stocks and bonds look so risky.

The dollar is likely to keep falling as long as the Federal Reserve continues to cut interest rates to rescue the nation's banking system and prop up the U.S. economy. And each decline in the dollar helps push commodity prices even higher.

My choice in the current market, however, wouldn't be a commodity index but the shares of a copper producer, such as Freeport McMoRan Copper & Gold (FCX, news, msgs), which I added to Jubak's Picks on Feb. 26. The supply of copper, unlike that of many other commodities, looks very constrained by production problems in South America for the next nine months or longer.

These next two aren't for buying today but for six months or more from now as market conditions suggest:

4. Financial stocks

I know you don't want to hear this. In fact, I'm sure you never want to own a financial stock ever again -- which is why you should be buying them once the sector has stopped plunging. (Want to see something scary? Pull up the three-year chart for the Select Sector SPDR-Financial (XLF, news, msgs) with 50-day and 200-day moving averages.)

Despite the sector's plunge, I don't see any sign of a bottom here or even a support level that might hold. But an aging developed world and an increasingly wealthy developing world argue for financial services to be one of the great growth industries of the next two decades.

When the sector finally stabilizes, you'll be able to buy the great growth stocks in the group at bargain-basement prices. I don't see a bottom in the sector closer than six months out, so I'll revisit this topic in April or May in more detail. In the meantime, if you want to get a head start on your research, take a look at HDFC Bank (HDB, news, msgs), HSBC (HBC, news, msgs), Banco Itaú Holding Financeira (ITU, news, msgs), Northern Trust (NTRS, news, msgs), State Street (STT, news, msgs), Toronto Dominion (TD, news, msgs) and Wilmington Trust (WL, news, msgs).

5. Oil

Yes, I'm worried about a short-term correction in the commodity markets; speculative excess is building. But once we're past that correction, I can't see how this sector won't continue to produce some of the best returns in the financial markets. Fundamentally, in commodity after commodity, I see rising demand and stagnant or falling supply. Even in oil.

The use of oil revenue to prop up dysfunctional regimes from Caracas, Venezuela, to Tehran, Iran, means surging demand (if you subsidize gasoline, lo and behold, people use more of it) and stagnant production (if you use your oil revenue to keep yourself in power, there's not going to be enough to invest in new production).

Here are stocks I'd be looking to pick up after a correction takes some of the risk out of the group: Petrobras (PBR, news, msgs), Chesapeake Energy (CHK, news, msgs), Chevron (CVX, news, msgs), Devon Energy (DVN, news, msgs), Impala Platinum (IMPUY, news, msgs), Monsanto (MON, news, msgs), Mosaic (MOS, news, msgs), Potash of Saskatchewan (POT, news, msgs) and Schlumberger (SLB, news, msgs).

In my next column, on March 18 (no column March 14), I'll take a look at the one factor that could mess up everything: a slowdown in China.

Continued: Developments on past columns

< previous |  1 | 2 | 3 | next >