Where to make money in 2009?

Time flies as we are approaching the Chinese New Year. That means the first month of 2009 will end soon. Given that money sitting in the bank's vault currently yields nothing, risk-takers must take action. But where to make money?

I believe we should chase where the money is. Since there aren't credit released by the banks (banks themselves have tough time repairing their balance sheet), the private sector which normally depends on the bank's handouts, will be dead. The government spending is the only game in town. Hence, we should pay attention to the details of the coming Obama's stimulus programs.

What to do:

a) Long Infrastructure-related stocks

b) Avoid companies that is short of cash or high gearing.

c) Avoid banks because managements have no incentive to take risk since their bonus are going to be forfeited no matter what has happened.

We should at the same time pay very close attention to the yield curve of the US Treasuries. If the US Treasuries yield surge, the risk appetite comes back as investors are withdrawing money out of the safe haven. Then, it is about time to long commodity-linked equities, despite the expectation that the investment community may be saying the corporate is suffering from the high cost of capital.

What to do:

a) Long commodity like oil, copper etc.

b) Long US.PST or other instruments that has a bearish view on US Treasuries.

Last but not least, I expect the US government will continue to absorb all the global financing power, ultimately crowding out all the other sovereign issues. Fiscally weak countries either have to raise interest rate or fall bankrupt. And I expect to see more instability, including some Eastern European countries.