Looking at a Macro Investing View

 | Mar 05, 2012 | 4:00 PM EST  | Comments
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This past weekend, I spent a lot of time on the phone talking about the world, the Knicks-Celtics game and the macro condition of global markets. I don't tend to spend a lot of time on macro stuff, because, as an investor, I prefer to react to what does happen rather than try to predict what will but there is a lot of interesting stuff going on right now. However, a lot of current developments could create opportunities for me as a deep-value investor, so I am watching them carefully.

One macro factor that is getting a lot of attention and chatter is one that I think is just noise. I will watch Super Tuesday tomorrow night with snacks and distilled adult beverages like it was a sporting event. I will be discussing and dissecting the numbers with like-minded friends and having a grand old time. But as an investor, or even as a trader, you have to be aware that the results will mean nothing in the market. It is way too early in the game for this election to have serious or lasting consequences for stock prices. If you are a political junkie like me enjoy the show, but if you are looking for market clues, it will be a waste of time.

Energy in general, and natural gas in particular, are on a lot of people's minds right now. Natural gas prices continue to work lower and the commodity is attracting a lot of attention from investors and opponents of drilling. Rolling Stone magazine was out with an anti-gas drilling article this week that garnered substantial attention. The article bought up all the dangers of fracking, questioned the total supply of gas and suggests it if a far dirtier fuel source than solar. The greens in search of public dollars for solar and wind will rally around the piece, but the truth is that gas is far cleaner than coal or oil and we have a lot of it right now. Fracking technology is going to continue to improve and the environmental risk will be reduced. If we want to develop energy independence from unfriendly sources, natural gas is the biggest part of the answer for now.

A research report from Mark Keisel of PIMCO points out that natural gas is cheaper in the U.S. than in the rest of the world and we will be able to develop an export market for natural gas and liquids over time. Natural gas exploration and drilling will create almost 300,000 jobs over the next three years and will be a big contributor to strengthening the economic recovery. Along with the news out this morning that General Motors (GM) is going to produce pickups that run on natural gas, and Blackstone's (BX) multi-billion dollar investment in Chenier Energy (LNG) to develop compression and shipping facilities, it looks like things are looking up for natural gas prices. I am getting very interested in the cheap stocks in this sector.

The other concern in the energy space is continuing developments out of the Middle East. A war involving Iran, Israel and the U.S. would be a disaster. There is a lot of commentary and many opinions on the subject but, at this point, I do not see a happy ending in this situation. It has all the seeds of an extended war, if not World War III, if everyone decided to jump into the mix. I do not want to see an unstable theocracy like Iran with nuclear weapons but another war in the Middle East will derail any hope of an extended strong global economic recovery.

The other big macro news is that China is looking for slower growth this year. I have received a flurry of questions about what this means and how to play it. The answer no one knows what it means but the Chinese government. Any economic data or predictions released out of China are for the purpose of furthering a goal of China. I do not think China issues economic news so much as they execute policy decisions intended to achieve a specific goal. You do not know what it means and neither do I. The right thing to do is ignore it as much as possible. If a piece of Chinese news creates a substantial price movement in U.S. markets, then react. Otherwise, I would not try to trade or invest based on anything China says or does. Whatever their goals are, it is not to make me money, so I ignore them.

All the macroeconomic and geopolitical news just reinforces my belief that it is best to react and not predict. If events push prices down to bargain levels then be a buyer. If the news creates excessive enthusiasm, be a seller.

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