Tuesday, November 29, 2011
Saturday, November 26, 2011
They discuss about government debts, equities, gold, the global economy and politics.
Some random quotes:
- "I would rather buy Italian government debt at 7% than US treasuries at 2%".
- "The best would be to break up the Eurozone ..with local currencies and the Euro co-exisiting..."
- "You're better off investing in equities rather than in bonds or cash over the next 10 years"
- "It's beautiful, wherever you look there are problems..."
- "I'm very concerned about the slowdown in China"
- "I own some companies like Hang Seng Bank and Sun Hung Kai Properties" and he doesn't invest directly in Chinese companies.
- "I'm fully prepared to have less money over the next years" (due to higher taxes).
- "It's my biggest worry, that eventually we'll have war".
- "People that have deposit in the bank may lose money, who knows" in reference to MF Global and other companies that play with clients' money.
- "Nothing will be done, the entitlement will continue, the government finance will continue to deteriorate and one day the government will go bust. Before that they'll print money..."
Saturday, November 19, 2011
2012 is likely to be cursed with the same problem as 2011 with western debt crisis in Europe, the US, Great Britain and possibly Japan. As now, there will be a "fight" between market forces which want to liquidate the debt and the central banks & governments who want to print money to avoid deflation at all cost. There are also talks about a debt bubble in China, but their citizen and government have savings and reserve, so although they will suffer as well, they should be OK.
We know that the US, UK and Japanese central banks have done quantitative easing, and will probably do it again, although there is political pressure not to do so. The ECB has not (officially) done quantitative easing yet. The US and UK are in the worst possible position since both their government and citizens are heavily indebted and have trade deficits. The Japanese government has a lot of debt, but has a current account surplus and not much private debt. Europeans are in the middle.
In the next few years, peak oil (and peak everything) will also have a serious impact on your investment, so I'll also give some longer term investments ideas to try to preserve capital.
Here are eight investment ideas I have for 2012 in no particular order:
- Rice and agricultural commodities:
I like rice for 2012 as last year, it has not performed very well and there is currently a global glut due to Indian rice production that largely offsets the issues due to the floods in south east Asia. For individuals investors, it relatively tricky to invest in Rice. For people who have access to the French stock market, you can buy RICEF PI OPENN (FR0010606509 - 1377N). Read Investing in Rice for other options and more details.
Longer term, agricultural commodities should perform well due to rising global population, aging of farmers worldwide, reduction of arable land and possibly massive money printing by central banks.
The good news is that there are plenty of options to invest in agricultural commodities via ETF such as DBA, RJA and ELEMENTS Rogers Intl Commodity Agri ETN (RJA), PowerShares DB Agriculture (DBA) and iPath DJ-UBS Agriculture TR Sub-Idx ETN (JJA). If you prefer agricultural stocks, you could invest in Market Vectors Agribusiness ETF (MOO)
- Crude Oil
This is both a short term and long term investment. Many pundits explain that today, oil costs around 70 USD per barrel to produce. For 2012, if you see crude oil (WTI) go below 70 USD, you can consider investing massively in the commodity, even though it may go much lower. In that case, production will slow considerably until prices go above 70 USD (and more) again.
Since peak oil is inevitable and the IEA says reserves are declining by above 6% per year, so we'll have a supply problem even if the economy is in recession and demand collapses. A US military report also says that surplus may disappear in 2012, which serious shortage occurring in 2015.
First, I'll explain how not to invest in crude oil namely United States Oil (USO), iPath S&P GSCI Crude Oil TR Index ETN (OIL) and the likes as they have an horrific decay and their target is zero after numerous reverse splits. I'm not kidding. If you invest in a commodity linked ETF always try to compare it with the tracked commodity for a period of at least 2 or 3 years. Actually, it does not hurt to do it for any ETF you plan to buy.
Unless you have access to oil futures, it also difficult to invest in crude oil for individual investors and you cannot easily store the thing like you do with Gold and Silver. You invest in Crude oil (WTI and Brent) via ETF such as ELEMENTS Rogers Intl Commodity ETN (RJI) or a fund like Barclays Capital Funds - Global Commodities Deltafor Singapore/ Hong Kong investors. Those follow Jim Rogers commodity index, so they are composed of a basket of commodities and only 40% is actually invested in crude oil. If you have better alternative that do not involve buying an oil tanker, I'd appreciate.
An alternative way to invest in commodities is to buy stocks in the middle east, for example via Market Vectors Gulf States Index ETF (MES).
- Gold and Silver Bullion and/or Coins
Gold and Silver have had a tremendous run for the last 10 years, but as long as we have negative real interest over the world they should perform relatively well. Having said that, an 11 year bull market, with no negative year (for Gold) is not very common, so I would not be surprised if we have 1, 2 or 3 years where Gold does nothing. I would also not be surprised, if Gold and Silver become bubbles as the central banks print money to try to save the system. You can invest in gold via GLD or PHYS ETF and silver via SLV or PSLV. PHYS and PSLV are managed by Eric Sprott, so I'd trust those more than GLD and SLV. If you are afraid of default risk by third party, then simply buy physical Gold and Silver and store them at home. If you are a US citizen and are not afraid of default by your bank, google "celente mf global".
Finally, gold stocks are cheap relative to gold bullion on an historical basis. You can read The case for Gold Miners vs Gold and Eric Sprott: Time to Buy Gold Stocks for details. Hong Kong investors may have to make their own Gold stock portfolio, see Hong Kong Gold Mining Stocks and Gold ETFs for a list of Gold stocks in the Hang Seng.
- US Natural Gas
Over the last 5 years, US natural gas is down 39% (Source: Indexmundi) at 128.30 USD per 1000 m3 and at the same time, Russian natural gas is up 20% at 435 USD per 1000 m3 and Indonesian natural gas is up a whopping 160% at 377.22 USD per 1000 m3.
Usually, commodities trade similarly over the world, but natural gas is different since it is difficult to transport. The reason for the decrease in the US is fracking, a technology breakthrough, which dramatically increased recoverable natural gas reserve in North America.
This may not be an investment that rewards investors by 2012, but with such a large price difference between the US and the rest of the world, there will certainly be people who will work on liquified natural gas (LNG) and terminals are planned in the US.
Once again commodity investing is difficult, and products such as UNG should be avoided like the plague. Actually, I could not find a proper way to invest in natural gas, except by buying natural gas stocks, please read Investing in Natural Gas for details. If you have ideas, let me know.
- Short long dated US Treasury Bonds
If has been tried unsuccessfully over the years, so the timing is uncertain, but the fact that long dated US treasuries bonds will be much higher at some point in the future is a certainty.
The US is the worst offender in term of debt: high government debt, high private debt, low saving rate and massive trade deficits. It can't get worse than that.
The federal reserve is also committed to print money to avoid deflation at all cost, this means the US dollar will lose value and investors will sell their low yielding treasury bonds (10-year to 30-year) and find assets with better value.
If you can't short treasury bonds directly, you can invest in TBF ETF, although it decays a bit you may be able to keep it a few years, contrary to TBT or TMV. Read How to short US treasuries for more information.
- Alternative Energies
With peak oil and pressure against coal use due to climate change, alternative energy will have to be developed if we may to keep living a good life. Investments in solar, wind, (alternative) nuclear, cold fusion and more will be made and there will be a lot of failures, but it's likely some companies will have an amazing success. Alternative energy stocks are very depressed at those levels after the 2008 bubble.
This is a long term investment (5 to 10 years) and 2012 may not be the right time, but who knows. Avoid investing directly in alternative energy stocks, as you are more likely to lose a lot of money and invest with ETF or mutual funds instead. Since we don't know which technology will prevail, I'd also avoid investing in Solar fund or Wind ETF independently, but rather find a funds that covers a broad range of alternative source. If I had a gun on my head, I'd rather invest in wind energy rather than solar energy, as the former has a better EROEI.
Based on the comments above, you could invest in ETFs such as Market Vectors Glb Alternatve Energy ETF (GEX) or First Trust NASDAQ Cln Edge Smrt Grd Inf (GRID) as well as mutual funds such as BGF NEW ENERGY.
Companies related to water such as water treatment, pipes and valves manufacturers... will benefit of the water issues around the world. For example, I can feel some investments are needed in the water infrastructure in Thailand and with climate change and rising population, better water management is needed for agriculture.
This is also a long term investment and unlikely to pay off immediatly in 2012 but you can invest with PowerShares Water Resources (PHO) and PowerShares Global Water (PIO) , read Invest in Water with ETF for details.
- Buy the Euro
This may seem counter-intuitive with all the bad press and talks about the end of the Euro, but the truth is Europe is trying to take care of its debt problem now and the ECB is reluctant to print more money to further help the indebted countries thanks to pressure from Germany.
The US and UK central banks seem to be happy to print as needed, and the Japanese Yen seems overvalued as investors take refuge in this currency.
So if you are a holder of US dollar, British pound or Japanese Yen you may consider buying Euros, especially if it seems the debt crisis is resolved, European government keep implementing austerity measures, private investors take their losses on bad investments and the European central bank is not involved in printing currency.
The best way to safely (without leverage) invest in the Euro would be to open a fixed deposit in Euro if your bank/country allows it. If it is not possible, you could also invest in a currency ETF/ETN such as CurrencyShares Euro Trust (FXE) or iPath EUR/USD Exchange Rate ETN (ERO).
Wednesday, November 16, 2011
They talk of the current economic situation in Europe and US, why Jim Rogers has move to Singapore (for is daughters), the loss of freedom in the US, Jim Rogers current investment themes (commodities), his views on Silver and Gold and more.
Tuesday, November 15, 2011
- Global systemic crisis: 30,000 billion US dollars in ghost assets will disappear by early 2013 / The crisis enters a phase of widespread discounting of Western public debt
- An on average 30% discount of Western debt between now and early 2013 ... without activation of sovereign CDSs, which appear a vast scam
- 2017 – End of the transatlantic relationship formed after 1945: The last US soldier leaves European soil
- Strategic and operational recommendations
. Gold: Stay on course!
. Stock Market: Restrictions grow tighter!
. Commodities: Warning, danger!
. Currencies: Lurch ahead!
- The GlobalEurometre - Results & Analyses
The full GEAB 59 (PDF format) is available to subscribers for 200 Euros per year (10 + 6 issues).
Here are the expected annualized return (based on valuation and historical earning growth):
US Large caps: 1.8% per year
US Small caps: -0.4% per year
US High Quality: 5.4% per year
International Large caps: 5.8% per year
International Small caps: 4.6% per year
Emerging Markets: 5.6% per year
Different kinds of bonds are expected to return between -2.3% and 1.3% per year so that is all bonds are expected to return negative interests except emerging market bonds. Managed Timber is expected to return 6% per year.
Those are real returns adjusted for inflation of 2.5% per year.
You can receive GMO's forecasts (monthly) and the quarterly newsletter for free by registering at http://www.gmo.com
Sunday, November 13, 2011
They discussed the current European debt crisis, his current portfolio allocation recommendation (25% stocks, 25% real estate, 25% bonds and 25% gold) and his views on the market.
He thinks emerging markets have bottomed out for the time being and that US market will probably continue to outperform other market, because of the Federal Reserve policy. The fed is considering a target of 7.5% unemployment before raising rates, but it may actually never happen.
Friday, November 11, 2011
It's not practical to store potable water as an investment and if you were able to do so, your government would probably seize it if there was a real water crisis. An easier way to invest in Water is to buy companies that provides pipes, valves and solutions to water treatment. You can invest via 2 ETF:
- PowerShares Water Resources (PHO) an ETF focused on small and medium US companies such as Valmont Industries and Badger Meter.
- PowerShares Global Water (PIO) an ETF focused on medium-sized to large international companies such as Suez Environment and KSB Aktiengesellschaft.
Investing in water companies is probably a long term bet (5 to 10 years or more) and you should probably not expect rapid gains, especially in the current environment.
He first explains Europe and the US are both a disaster and then gives his investment strategy:
- Short European stocks, US technology stocks and emerging markets.
- Long precious metals (Gold and Silver) as well as agricultural commodities.
- Long currencies (but do not specify which ones).
When asked if Gold is in a bubble, he replies that very few people own it so it can't be in a bubble.
Tuesday, November 8, 2011
He said (as in previous interviews) that QE3 has already started, because when Bernanke says he will keep interest rate at zero percent until 2013, he can't just sit he must intervene to keep the interest rate at that level and that shows in the money supply.
Precious metals (Gold and Silver) and agricultural commodities are his main commodity investments, but he also likes on base metals. He still prefers Silver rather than Gold because the former is still way down it's all time high.
Finally, he explains that crude oil will go higher than anyone expects because reserves are going down every year, although if a major event occurs (such as Spain going bankrupt), crude oil would go down with it, but that would then be a buying opportunity.
Monday, November 7, 2011
The Fund is managed by Russell Hoss, CFA, portfolio manager, who also oversees two of Euro Pacific Asset Management's other fund offerings, the EP China Fund (EPHCX) and EP Asia Small Companies Fund (EPASX). The strategy is targeted towards US-based investors who are concerned that global inflation, growing fiscal deficits, and below-trend growth rates are challenging the investment outlook for mature economies.
The EP Latin America Fund uses a top-down approach to identify countries within the region that have extensive natural resources, maintain balanced budgets, and carry low levels of debt. Once countries with these characteristics are identified, the fund uses bottom-up fundamental analysis to identify under-levered companies with leading market share, attractive free cash flows, and a stable dividend history.
Wednesday, November 2, 2011
He explains his view on the situation in Europe and the US regarding debt issues, mention commodities bull markets during economic hard times and tells his worry about agricultural supply issues including the worrying aging of farmers. (Average farmer age in the US: 58, Japan: 66 and Australia: 66).