Buy gold – tick

Sell Australian Dollar and buy Japanese Yen – tick

Put options on Westfield Group – [screech!]

According to Richard F on the Money Morning blog, he has a much better idea than the Westfield trade:

“How about shorting RP Data – (ASX: RPX).”

Now that would be just spiteful wouldn’t it! It’s a thought though. They are super leveraged to the housing market. When that falls over you wouldn’t think there would be too many punters coughing up for their research.

Although let’s be fair about it. An even better trade would have been to have bought RP Data stock last year when it was trading for less than 10 cents per share:

Now it’s trading at just below 50 cents. We can only hope Mr. Joye and his mates took the opportunity to tuck in at what was clearly a bargain price.

The only problem with short selling RP Data is the lack of liquidity. If you look at the one-month chart below you can see it rarely trades:

You’d need bravery the size of basketballs to risk getting yourself in on a short position there. With such low liquidity it wouldn’t take much for someone to push the share price higher and suddenly you’d find yourself in a margin call and having to sell your house to cover the losses!

So, as a short selling proposition, I’d stay clear of RP Data.

Why not buy Japanese stocks?

There are a couple of other alternatives, but before I get on to those, a quick note on the Sell AUD, Buy JPY contrarian trade.

First, you can read Slipstream Trader editor Murray Dawes’ take on the Aussie dollar in the companion article.

But buying the Yen is potentially just the first step. Rather than paying to hold Yen – because you’re forfeiting interest payments on Aussie dollars – you could go one step further and follow the advice of The Daily Reckoning’s Bill Bonner.

Bill thinks the trade not just for 2010 but for the entire next decade is to buy Japanese stocks. Aside from the obvious – Sony, Toyota, Honda – your editor couldn’t tell you a single thing about which Japanese stocks to buy.

But if you like the idea – and again, this isn’t advice, just information – the easiest and probably lowest cost approach is to buy the iShares MSCI Japan exchange traded fund. It trades on the ASX with the ticker IJP.

You can buy and sell it just as you do any other share traded on the market. I’m not saying you should go for it but… ah, why not, I like the Japan trade idea. Look at the chart below to see the twelve month performance:

If you go for it, just be careful when placing orders as it’s also reasonably illiquid – yesterday less than five thousand shares changed hands.

Anyway, back to the bearish property strategy…

Other suggestions have been that Westfield isn’t a great idea due to its exposure to the US and UK markets. Something more local would be a better bet.

We had another look at all the commercial property trusts and not surprisingly the best time to short sell them would have been eighteen months ago. Many of them are still in the red by 80% or 90%.

Short selling them now is certainly possible, but there’s probably better options.

Commercial property trusts still well down

Something like the SPDR S&P/ASX 200 Listed Property Fund [ASX: SLF]. As the name suggests it’s a listed fund made up of a number of individual trusts which are also listed on the ASX.

In fact, we had recommended it as a buy to Australian Small Cap Investigator subscribers earlier last year as a way to get exposure to the potential bounce in the property sector. That happened to some degree, however we only picked up just over a 20% gain before advising subscribers to cash out in November.

But the most obvious idea is one we overlooked. If you’re bearish on Australian residential property then surely you’d look to sell the company with the biggest exposure to it.

It’s a proverbial no brainer.

And with the share price of the company in question back to pre-crash levels, thinking about doing something soon isn’t such a bad idea. Here’s the chart:

It’s Commonwealth Bank of Australia [ASX: CBA] of course.

Go for the biggest when selling short

As the company proudly admits, it’s the safest of the four major banks because it has the largest exposure to Australian residential mortgages [gulp!].

Of course, short selling something just because it’s high isn’t always the best strategy. Especially if the price goes even higher. So for this one I’m happy to defer to our resident Slipstream Trader and technical analyst Murray Dawes.

I asked him this morning what he thought of the idea. The upshot is that it’s not a trade Murray would make right now, and it’s not a trade he’d recommend to Slipstream Trader members just yet.

However, he does think there’s an opportunity for a quick swipe at it on the short side, providing you’ve got your stop order placed close behind in case it swings the other way.

But in terms of a Contrarian Investment Idea for 2010, getting in to a short position on CBA looks premature. We’re not thinking of short term trading ideas, we’re thinking about longer term progressive downward movements in the share price.

Plus you want to protect yourself against potential losses as well.

One way to do that is with what the guys at City Index call a ‘guaranteed stop loss’ order. I won’t give you all the details here because I don’t have the space. All I will say is that it’s a good way of knowing exactly what your maximum loss will be before you make the trade.

That’s got to be worth something.

It’s certainly a good idea if you want to trade on the short side but are worried about getting ‘caught short’ and losing a bunch of cash.

Anyway, I think that pretty much settles our 3 Contrarian Investment Ideas for 2010:

  • Buy gold
  • Sell Aussie dollar, and buy Japanese yen
  • Short sell CBA – but not just yet!

But as I wrote earlier in the week, if you’ve got any other ideas or you think our contrarian ideas are rubbish, feel free to make comments when on the Money Morning website when this article is posted later today.

Cheers.
Kris.

60-Second Market Round Up
by Shae Smith

The S&P/ASX 200 was down yesterday to 4,868.10, lower by 31 points. The positive lead in from the US has seen the index open up nearly 20 points higher this morning.

The Australian Bureau of Statistics will release their figures on the labour market today, and these will include the unemployment rate.

The Dow Jones Industrial Average closed at a 15 month yesterday. The Dow ended the day at 10,680.77, up by 53 points. However Bruce Bittles, a chief investment strategist at Robert W. Baird, is worried that expectations are a too high and the market is “suffering from a little too much optimism”. Read more about the US market here.

Overnight in the UK, the FTSE dropped 0.46% to close at 5,473.48.

The Nikkei closed at 10,735.03, lower by 1.32%

Gold continues to dominate the news this week after another short rally last night. Spot gold gained about USD $9 overnight, based on speculation that the Fed will keep rates at these unnatural lows for an extended period.

The price of spot gold in Australian dollars is trading at $1,232.66 while in US Dollars it is trading at $1,138.11. The price of silver in Aussie dollars is $20.18 and in US Dollars it is $18.63.

The Aussie dollar versus the US dollar is trading at USD$0.9236, and against the Japanese Yen JPY84.37

Crude Oil closed at USD$79.67

For the biggest movers on the market yesterday click here…