The number one overall macro trend facing our world today is the fall of the US currency from its long term dominance. The Future Tense home page is dedicated to discussing why this trend is occurring today and why it will continue in the future.
With this understanding in place, an investor should focus on how to maximize his or her portfolio to benefit from this massive worldwide shift. The following investment choices will provide that opportunity:
1. Gold/Silver
Gold and Silver are in long term secular bull market and will reap the greatest rewards during the dollar's fall. These two investments have unlimited upside and over the next 3-5 years will only be exceeded by mining stocks in percentage gains.
How do I buy gold and silver?
I advise purchasing gold and silver in three different ways:
1. Physical Gold and Silver kept at home
2. Physical Gold and Silver kept at safety deposit box
3. Physical Gold and Silver stored overseas
For the first two options I would recommend using trusted company such as The Northwest Territorial Mint. They also charge low premiums for the metal.
For the third option I would utilize two companies: Goldmoney and The Perth Mint Program.
Goldmoney is a service provided by one of the most well regarded members of the gold community: James Turk. Their services allow you to purchase metal and have it stored in either London, Switzerland, or both. All transactions are done by electronic transfer so if you decided to sell, the dollar amount would be wired back into your bank account here.
The Perth Mint Program is provided by the government of Australia. Similar to Goldmoney, they store bullion for you in a secured vault in Australia.
Both services allow you to take delivery of the physical metal if you desire. They both have strict auditing services quarterly to make sure the total amount of metal in their vault matches their customer accounts. I would recommending using both services and keeping some of your metal in London, Switzerland, and Australia.
If you have funds in a 401k or IRA and you need to purchase precious metals through a fund, I would not recommend purchasing the popular (GLD) for gold or (SLV) for silver.
Both these funds come with the risk that they may not be backed 100% by physical precious metals and a portion of their holdings may only be backed by a "paper promise" to receive metals in the future.
Sprott Asset Management launched two funds this year to compete with these two ETF's. The Sprott funds purchase physical metal that are stored in a vault, and investors can take delivery of their metal at any time. The funds are:
(PHYS): Sprott Physical Gold Trust
(PSLV): Sprott Physical Silver Trust
To speak with a representative of their organization contact Sprott Private Wealth.
2. Foreign Stocks Focused On Energy, Agriculture, Water, Natural Resources
Markets go through cycles that usually last 20-25 years.
During 1960-1980 we had a bear market in stocks/bonds (paper) and we had a bull market in commodities (things).
During 1980-2000 we had a bull market in stocks/bonds (paper) and we had a bear market in commodities (things).
Beginning in the year 2000, the cycle has once again reversed. Real stock values adjusted for inflation peaked in the year 2000 and have been in a bear market for the past 10 years.
Commodities bottomed in 2000 and have been in a bull market for 10 years.
I expect this trend not only to continue over the next 3-5 years, but to accelerate.
There are many factors that lead to this, but the most important are:
1. Weakening dollar pushing commodities higher
2. Supply still recovering from the 2008 credit crisis spike shock
3. Demand has increased and will continue to do so in the emerging markets who are all hungry for oil, food, and natural resources.
The best way to play this opportunity is to purchase companies that focus on energy, agriculture, water, and natural resources.
I would focus on buying companies in countries that are rich in resources and are in growth stages such as:
1. Australia
2. Canada
3. Asia - China, Hong Kong, Singapore
4. New Zealand
5. Brazil
Not only should you purchase the companies within these countries, but you should
purchase them in THEIR currency. As the dollar falls and these companies rise in value you gain value in three different ways:
1. Currency Exchange
2. Stock Appreciation
3. Dividend Payments
For example, if you buy $100 worth of Agro Growth shares out of Australia today and in five years the Australia currency has appreciated 25% against the dollar, when you go to sell your stock you have made $25 EVEN IF THE COMPANY GAINS NO VALUE.
If the stock appreciates $25, then you have made $50.
If the company pays a 10% dividend, then you have made $100.
($25 currency appreciation)
($25 stock appreciation)
($100 worth of stock paying 10% a year is $10 per year. 5 years =$50 in dividends)
Please note that if the dollar rises in value then the opposite happens. You lose the difference in currency exchange.
My personal favorite option to utilize this investment strategy is through EuroPacific Capital.
By speaking with one of their brokers they can put together a portfolio for you in multiple countries and multiple currencies that is focused on these investments.
If you have a higher net worth (Europac requires no minimum investment) and you do not wish to be actively involved with your investments, I would also recommend speaking with the PFS Group. They have an excellent understanding of the world ahead of us and have funds highly focused toward natural resources and inflation protection.
3. Precious Metal Mining Stocks
All of the investments listed above will experience tremendous volatility over the next 3-5 years, but they pale in comparison to the wild ride in mining stocks.
During the financial collapse of 2008, many gold mining stocks lost 50-80% of their value in a few months. Most of the stocks regained their value in 2009 and surged to new highs in 2010.
If you have the stomach to ride the storm, mining stocks will be the largest percentage gainers during this bull market. I would allocate a percentage of "speculative" money to invest in this sector. The following are very attractive:
GDX - This is a basket of 20 of the largest gold mining stocks
SLW - Silver Mining Company
SSRI - Silver Mining Company
PAAS - Silver Mining Company
TGLDX - Tocqueville Gold Fund - This is a fund managed by professional investors dedicated to mining stocks
For additional resources and professional research on mining companies I would recommend investing in the following newsletters:
Gold Stock Analyst Newsletter - GoldStockAnalyst.com
The Morgan Report - Silver-Investor.com
4. Shorting the Long Term Treasury Bond Market
This will be one of the most profitable investments over the next 3-5 years, but will face a very bumpy ride similar to the other investments described above. The bond market has been in a 29 year bull market which peaked during the fall of 2008 during the financial crisis. The market is currently still in the mania stage which provides an attractive short opportunity. The main investor tool to short the market available today is through an ETF called TBT, which shorts long term treasury bonds.
This should be considered part of your "speculative" position.
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