An article in the San Diego Tribune offers some investment advice in these hard times. I have some other advice for you, which you might like to consider after reading this article, which I find only modestly helpful.....mostly for its factual information.
Gold is far from over-valued based on historic measures. Based on the previous three cycles, the dow jones index vs gold price can go to 4, giving a gold price of over $US2,400/oz. Adjusted for inflation, gold is still cheap. In fact, it was only lasy year that it surpassed its old high of $780/oz – set 30 years earlier. But there has since been 30 years of inflation, compounding at 3% per annum.
Gold is not simply a hedge against inflation. It is a hedge against debasement of currencies. In a world where all major governments are debasing their currencies, we are looking at currency relativism. The only strong or 'hard' currencies are the commodity producers like Australia, Canada, NZ, Brazil and South Africa. Because of their cheap labour, resulting from structural liberalisation in the post-communist (liberalised collectivist) era, you can also consider China, India, Brazil as attractive emerging markets.
There is not going to be a collapse in China anytime soon because this is a 'super cycle'. China has plenty of cheap labour, and that will mean Western factories will continue to invest in their country. The softening of the global economy offers reason for China to stimulate domestic demand, as Western countries previously did. So these economies are attractive.
Why is Japan’s currency too strong? The US is simply debasing their currency at a faster rate than Japan. You can rest assured that Japan is going to change that very soon, as it contends with a public debt of over 200% of GDP and diminished export competitiveness. So this is more economic or simply currency relativism.
Bonds offer a poor yield in the USA, so you need to look at short term emerging market or hard (commodity) currency markets like Australia, NZ, South Africa and Canada, however even these markets are pretty volatile, so you have to trade opportunities.
Real Estate in the USA or Japan is ok, but gold stocks is by far the best opportunity.
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Andrew Sheldon www.sheldonthinks.com
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