HardAssetsInvestor

Written by Lara Crigger  |

October 16, 2009

Matt McCall: Playing The Next Great Bull Market

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The author of ‘The Next Great Bull Market' shares his thoughts on how investors can play the coming commodities boom.

• Why he's still in UNG
• Bull market benefits base metals, gold and oil
• How (and why) investors should play lithium

 

Commodities are on a tear lately—and by all signs, they're only headed higher, says Matt McCall, author of the upcoming book, "The Next Great Bull Market" (Wiley, November 2009). And now, he adds, is the perfect time for investors to jump in.

Mr. McCall is the founder and president of Penn Financial Group, LLC, and co-author of 2009's "The Swing Trader's Bible: Strategies to Profit from Market Volatility." A vocal advocate of ETF investing, he's also a regular commentator on CNBC, Fox Business Network, Fox News Channel and Bloomberg.

Recently, HAI associate editor Lara Crigger sat down with Mr. McCall to discuss his thoughts on the bull market for commodities, including which sectors stand to benefit, why he likes UNG and lithium, and why he's not worried about tough talk from the government on regulation.

 

Lara Crigger, associate editor, HardAssetsInvestor.com (Crigger): When we last spoke back in March, you said you were laying low on commodities. As the recovery has strengthened, have you become more heavily invested?

Matt McCall, founder & president, Penn Financial Group (McCall): Yes, actually, commodities are the sector I'm most heavily invested in right now; my three largest holdings are gold, silver and natural gas. But I have been adding to everything from precious metals to energy to base metals.

Crigger: Natural gas? Even with inventories at record highs?

McCall: Yes. I believe we're going to have a much colder winter; a lot of forecasters have been calling for that. I believe we're going to see a spike in natural gas between now, the end of winter and the first quarter 2010. I've been buying on every bit of dip that we have.

I've been buying UNG [U.S. Natural Gas Fund], which isn't the greatest vehicle, but it's easy for us to play it without having a futures account. Most people I've talked to are staying way away from UNG—in fact, they're shorting it. But I think that natural gas is going to pop, and when it does, the difference between the ETF and the actual futures price will narrow. UNG could pop at $15-$16 (it's currently trading at $11) in the next four-to-six months. If that's the case, there will be a very large percentage gain.

Crigger: In your book, you predict a coming "long-term commodities bull market." What do you see driving this trend?

McCall: It's a combination of three key factors. The first is longer-term inflation, which I believe could actually turn into hyperinflation in the coming years. Here in the U.S., we just continue to print money, and that's eventually going to catch up with us, and inflation's going to be a concern. Look back at history, thousands of years: Any time an empire flooded the population with currency, inflation was always the end result eventually. I think that's going to be the case here, too. And obviously commodities do very well in an inflationary environment.

Second, the U.S dollar hit a 14-month low recently. I think that trend will continue, the way our government is going; they want to have a weaker U.S. dollar, as far as exports are concerned. I don't really believe in that, but I think that's the way we're going. And commodities also do well with a weaker U.S. dollar.

Third, I believe the global economy has turned. We were in a recession, but I think we're well on our way out of it. Countries such as Brazil are already out of the recession. That's going to create a greater demand for base metals and energy.

All three combined would give us an amazing bull market for the next five-to-10 years. Even two of the three would still get a bull market. So I think you're really set up with those three key factors, fundamentally speaking. Technically, we've been in an uptrend for several years now; I don't see that momentum stopping.