Black Friday – Time to go shopping?

I’d say buy this dip, especially, if you have been sidelined. Forget Walmart's and Best Buys’ door busters, power on your computers and take advantage of some real bargains out there.

The geopolitical headline is pressuring the risk trade this morning, with Dubai sovereign fund requesting to restructure its debt. The markets in US are down, following the selloff in Asia and Europe, while we were feasting on turkeys yesterday.

So is this another markdown opportunity and should we get involved? It depends. It is not a time to buy indiscriminately. I will explain a bit later.

I truly believe the headline itself is not a significant catalyst to bring the market to its knees. Geopolitical events, generally speaking, are short term, flash in the pan events, with 8 out of 10 times presenting an attractive opportunity to add to portfolios. Nothing will likely change. Dubai’s lenders will figure out a way to restructure its debt. It’s in no one’s interest to let them default. Also, despite the scary headlines that Dubai has $80-$90 billion in debt, only a few billion is due in the next 12 months. A drop in a bucket. So by itself, the event is insignificant. But, one should not forget a ‘butterfly effect’, as economists would point out. History buffs would also remind us that many of the world's cataclysms started with small and unimportant events. At least, viewed as unimportant at that time. Recall how the WWI started with the Sarajevo assassination of a relatively unknown political figure, Archduke Franz Ferdinand, heir to the Astro-Hungarian throne. The history is full of such examples, but I digress.


At first blush, a worldwide selloff is likely just an excuse to take some profits, as nervous investors have already been uncomfortable with levels of certain assets. Typically, in times of uncertainly and fear the US currency gets a bid and as we have witnessed many times over the past few months, strong dollar sends the equity markets and commodities in the opposite direction. Not what we learned in business school, but once again, I digress.

So I am expecting a fairly typical selloff, with commodities and financials leading the way down. It is hard to say whether this would shift the sentiment scale into the fear camp and cause irrational selling. Watch for bear gurus, to come out of the woodwork to rehash once again their bearish arguements.




What am I looking to do? I think I will take advantage of this light volume selloff and selectively add to my portfolio. I will focus on stocks that have ran away from me, and buy back some December calls I wrote over the last few weeks. I am not buying financials as it is not really known at the moment who might be on a hook for Dubai’s debt. Even with restructuring, these assets may take a pounding. It is also unknown what ridiculous assets are backing up these loans – anyone wants to buy an indoor ski resort? I am not planning to add to my emerging market exposure – as it will likely be the most volatile sector. If the risk trade gets reassessed, the first exodus of money will impact the emerging markets.


I am not buying gold either. Gold has been clearly acting differently than one would expect today. Instead of attracting money flows, as typically happens in times of uncertainly, it is for sale today, behaving just like other risky assets. Take mental notes, goldbugs.

My quick and dirty Buy list: APC, NKTR, MWA, ANR, XTO, CELG, AKS