Commodity related stocks have great balance sheets, great businesses and good pricing power.
Banks have heinous balance sheets, terrible businesses and zero pricing power.
Both sectors have loads of shorts in them. Mostly, people are short commodities, due to the belief of a ‘global growth’ slowdown; whereas they’re short banks, well, because they’re banks.
The flaw in being short commodity stocks is parallel to being long banks.
Companies like Agrium Inc. (USA) [[AGU]] , CF Industries Holdings, Inc. [[CF]] , The Mosaic Company [[MOS]] and Potash Corp./Saskatchewan (USA) [[POT]] have displayed zero signs of slowdown. In no way has growth or pricing power deteriorated. Therefore, if you are betting against them, you’re either guessing or just trying to catch “a quick trade.”
On the other hand, buying banks here means you believe there will be an uptick in business, despite seeing zero signs of a respite. Again, you’re guessing or trying to catch “a quick trade.”
At the moment, everything is reliant upon the minute by minute moves of crude. However, I guarantee you, this will soon pass. Eventually, businesses are evaluated on their supply/demand statistics. In my opinion, if forced to choose, I’d stick with names like FCX , Southern Copper Corporation (USA) [[PCU]] , AGU and MOS, while avoiding banks like the plague.
Naturally, market participants are trying to catch an early turn in both sectors, hoping to be rewarded for their early entry points. But, more often than not, timing tops and bottoms is a low percentage bet. You’re better off throwing sticks of dynamite at your life savings, than mess around with banks, following 40% spikes, or shorting commodities, following a 40% decline.If you enjoy the content at iBankCoin, please follow us on Twitter