Matt McCall is the president of Penn Financial Group, the editor of the ETF Bulletin and a leading markets analyst on the Fox Business Network. He spoke recently with the editors of HardAssetsInvestor.com about commodities and where to position your portfolio for 2009.

HardAssetsInvestor.com (HAI): It's been a challenging market to say the least, Matt. Where have you been positioning your portfolio these days?

Matt McCall, president, Penn Financial Group (McCall): It has been a challenging market, for sure, but we've been hanging in there. We were just running reports, and our clients are between flat and down 4% this year. We're pretty happy with that, considering the markets are down about 17%.

The reason we've been doing well on a relative basis is that we still have a big cash position. Also, our largest single holding is GLD [NYSE Arca: GLD], the gold bullion ETF. This market has been all about staying diversified and being willing to sit on your cash until it's time to put money to work again. We have been scaling into positions little by little, but we haven't been going wholeheartedly into the market yet.

HAI: What will make you jump full bore into the market?
McCall: That's the big question, isn't it? What is the catalyst to put in an absolute bottom? The answer is, I don't think there is one catalyst that will drive this market forward.

When the time comes, I'm going to use a technical move to know when to get in. There's a lot of noise in the market right now. Over the past few days, we've seen the market moving upwards because of what the CEOs of a few financial companies are saying. But if we listened to those same CEOs a year ago, we would have bought Citigroup at $30/share. What's to say we can trust them now?

I think the turning point will be more technical than fundamental. I don't think we'll see a big blow-off capitulation at the bottom, but a slow capitulation that just kind of gives up on the market. That's what I'll be looking for.

HAI: Let's turn back to the positions you do have in the market, like GLD. What's driving that allocation?
McCall: We bought GLD at $65/share about two years ago, when gold was in the mid-600s [per ounce]. The reason we bought it at that time was that I was looking for inflation to become an issue. The reason I'm still holding it and have added to it recently is that I'm still concerned about inflation.

There's a big argument on the Street right now about inflation versus deflation. I'm a big believer that when the government is promising to spend $3 trillion, inflation will take hold eventually. We like gold in that scenario.

Gold is also a safe-haven asset. And with all the turmoil in the financial markets right now, that makes it attractive to people. As long as people believe in gold's safe-haven status, it's something I want to have in my portfolio.

The other piece of the story on gold is diversification. You want to diversify your portfolio, especially given the difficult times we have been going through. Gold adds diversification, lowering the overall risk.

HAI: Gold stocks have been hot recently. What's your take there?
McCall: I own some gold stocks: Gold Corp and AEM. The biggest exposure we have to gold stocks is through the Market Vectors Gold Miners ETF [NYSE Arca: GDX]. It's something that I've owned for quite some time. Gold stocks have under-performed gold recently, but I still think you have some great opportunities.

If I had to choose between the two, I'd own GLD. It's more of a pure play. You're not betting on any management decisions or hedging decisions at the corporate level. But right now there is a disconnect between GLD and GDX. The last time gold was at $1,000/ounce, GDX was trading in the 50s. Today, GDX is in the mid-30s. I think that gap will close, and GDX will perform well later this year.

HAI: What about oil? Oil's all over the place. What's the outlook for oil here?
McCall: I believe oil will go back to triple digits sometime in the next 18-24 months. I have not placed a major bet as of yet, however, so I'm not putting my money where my mouth is.
I do own some oil stocks, mostly in the biggest names, like Exxon-Mobil and Petrobas. But I haven't made a big bet yet on the underlying price of oil using ETFs. I probably will soon: I've been watching oil put in a base over the past few months. But I haven't seen the kind of breakout that I would look for before putting money into something like USO [the US Oil ETF] or USL [the US 12-month Oil ETF].

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