St. Patrick’s Day and Spring

This is one of my favorite times of the year, green starts showing up not just on Irish and wanna-be Irish folks but also in the natural environment. Here in the Great White North the temperatures have been increasing and snow has been melting. It won’t be long before summer is here! We’re also coming up on April 15, which for many of means taxes (and IRA contributions!). I don’t know about you, but putting April 15 in the rearview gives me a huge sense of relief.

Thoughts on Megatrends and Some Advice

I thought I’d take an opportunity to share some of my thoughts on the major trends happening right now, as well as share some advice on how to benefit from those trends for you personally. We’re in a time of great upheaval and change, and the good news is that wise and prepared investors will be able to profit handsomely no matter what happens as long as they react to the trends correctly. Without further ado:

  • Currencies – Right now we’re in the middle of a race to the bottom, as most developed and developing countries are printing dollars to inflate their way out of debt. Usually currencies fluctuate as some gain strength while others weaken, but right now it’s a case of all currencies weakening but some weakening faster than others. Although the US government is printing dollars like it’s going out of style, the dollar remains a reserve currency for the world and will weaken at a slower rate in the short-term. However, longer term I feel your best bet is to increase your exposure directly and indirectly to resource-based, well-managed currencies like the Canadian dollar (CDN$), Australian dollar (AUS$) and Norwegian kroner (NOK).
  • Interest Rates - With interest rates at record lows in most of the developed world, the only direction to go is up. This may not be in the near future,  but at some point rates WILL go up. This is bad news for bonds and most income investments, like REITs (Real Estate Investment Trust) and MLPs (Master Limited Partnership). I would suggest exiting all or most bond holdings and being very careful with any income investments going forward.
  • Real Estate – Continuing the interest rate theme, I don’t see any upside for real estate for quite a few years, exceptions being long-term primary residence purchases and forced equity plays (fix and flips, etc.). Rising interest rates will mean rising payments, and with unemployment remaining stubbornly low and wages stagnant or decreasing, there are no major forces at work that would result in rising prices. Just because prices are low right now doesn’t mean they can’t drop lower, or stay low for many years.
  • Oil & Energy – I really like this sector, but as always you need to be careful where you invest. Energy needs will only increase as the world continues to industrialize and develop, and prices will also benefit from energy’s status as a hard asset. Since oil (and other hard assets) are priced in dollars that are constantly being weakened, prices should continue to rise as the dollar weakens. Other factors include growth in China/India and political instability in major oil producing countries. The plays I like best in this sector include the Canadian oil sands (estimated at two trillion barrels, more than EIGHT times the reserves in Saudi Arabia), developmental deals in the Southeastern US and select alternative plays.
  • Food & Agriculture - With global population continuing to rise, major population sources developing (i.e. China and India) and eating more meat (it takes eight pounds of grain to produce one pound of meat), and global farmland decreasing I see prices for food continuing to rise. Food and commodities will also benefit from their status as hard assets and prices rising as the dollar weakens. The easiest ways to invest here are through ETFs (exchange-traded funds) and innovative products like those offered through Everbank (www.everbank.com).
  • Precious Metals - You’ll already know I really like this sector, especially silver. Yet another class of hard assets, metals like gold and silver will do well as the dollar and other world currencies weaken. Despite recently reaching new highs, I see a LOT more upside for both gold and silver, as well as some more speculative plays in beaten-up metals like uranium. There are many great ways to expose your portfolio to this trend, among them junk silver as well as junior producers (be VERY careful here as the sector is notorious for shams, very important to have experts to guide you).

If any of the above resonate with you or you’ve been considering making some moves, I’d be happy to weigh in and even help out if that makes sense.

A Grab-Bag of Links

Updates on currencies, silver and the macro picture:

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