Although we don’t think this “recession” is anywhere close to over and will get better any time soon, it would be wise to watch these forms of investments very closely. If or when the double-dip comes, be prepared to jump on these investments like a rabbit on viagra because when the dust settles, these areas will be where the parties at.
Gold, Energy, Food and Land
Investors who have survived the deepest recession in decades have witnessed a dollar collapse, a housing market collapse, government defaults and a stock market collapse. After the recession started in 2007, everyone is thinking the same thing, where do we invest our money now? In as early as 2005, a monkey could close their eyes throw their money into stocks, bonds and real estate to easily profit. The buy and hold strategy was lucrative and quite accurate. Most retail investments had a perceived safety of principal and long term growth. From March 6th, 2009 to the second quarter of 2010 we witnessed a confident bear market rally, meaning we had a 30% recovery in stocks overall, but still down 30%-40% from pre-recession highs. We are all still trying to recover back to even.
So what is an investor to do?…. Let’s start by decreasing ownership of pieces of paper like stock certificates, bond certificates, mortgage documents. Over the coming decade smart investors will be a shifting from paper assets to physical assets and commodities. If someone could find a good way to invest in clean drinking water, that would be a good idea too!
It’s time to invest in Gold and Silver, Energy, Food and Land. These investments are based on earth produced physical objects… I know that sounds like weird description, but think about it. They are in high demand, they are finite (will run out) and are increasingly harder to produce.
GOLD and SILVER
Gold and Silver represent the physical forms of money, because they are resilient to financial collapse and will be a store of value for your savings. Gold and silver stocks are highly volatile and will fall with the market, but they can turn and start increasing as markets fall. The key is to find growth companies. Canada dominates gold mining and exploration, being a commodity based market.
Physical Gold is great if you can afford it, because it will protect against inflation and has done well over long periods of time. See our post on “Gold is Money”.
As you can see from the chart above, physical gold has been on a tear since 2000. Regular people in the growing middle class of Russia, India and China are buying gold jewelery and gold investments at an alarming rate. It is not usually a good idea for the average investor to buy when a chart is at such a peak, but gold prices can continue to rise on fear. $1,200 may become $1,800 in the next few months. Physical Gold can typically have corrections between 10% and 25%. Buy as price drops and then buy more regularly.
Some small and intermediate gold stocks for the growth investor:
Yamana Gold (AUY), Jaguar Gold (JAG), Detour Gold (DGC), U.S. Gold (UXG), Eldorado (EGO), IAMGOLD (IAG), LIHIR Gold (LIHR)
Minera Andes Inc. (MAI), Terrane Metals (TRX), Claude Resources Inc. (CGR), Atac Resources Ltd(ATC), Rubicon Minerals Corp (RBY)
Junior Gold stocks are often long term holds and are also high potential acquisitions by larger companies.
Silver Stocks to look at:
Silvercorp Metals (SVM), Hecla Mining (HL), Silver Wheaton (SLW)
Oil is the number one energy source in the world and consumption will continue to rise with the rise of China, India and Brazil. Look for oil to push for $100+ a barrel. This is almost a no brainer, however, you cannot just buy mature Oil stocks and expect a return, because they are volatile and don’t offer much growth for the average investor. To invest, you must invest in Oil Futures and Options. It took me years to understand that a regular investor can buy oil futures. You will have to sign up with a broker that has e-mini futures like optionsXpress.
Oil Futures – miNY Crude (QM)
Hori. Beta. NYMEX Cr. Oil (HOU)
For stocks, Energy companies that produce natural gas, heating oil, hydro and oil delivery pipelines produce great returns even after the recession.
Food is our lifeline, literally. When you invest in Agriculture, farming and processing after the recession, you’re essential betting that we will continue to run out of food and consumption will be more than demand. Here are a few companies.
Exchange Traded Fund:
The Market Vectors Global Agribusiness ETF (amex:MOO),
Potash Corp (POT), Agrium (AGU), Mosaic (MOS)
Real Estate and Land
Owning property in areas that will grow is a great way to invest for the future. A company can go bankrupt, jobs will be lost, money can be printed, however land cannot be reproduced, it is finite. The recession has brought real estate prices down in several parts of America and the world, not quite in Canada though. The key is to expand your horizons past your own city and assume that the market has some downside risk.
We are not affiliated with nor do we offer this article as a solicitation to buy the above mentioned securities. Please do your research and/or contact an advisor before making a qualified investment decision.
– Kwam Mensah, MastermindGrowth.com.