I won’t make the foolish mistake of pushing my personal political views into this letter. My wife calls my ideas crazy, if not offensive and downright unrealistic. So if my politics elicit disgust and confusion with my own wife, I doubt I’ll have much luck parading them here.
Who you vote for is your business. But when it comes down to what you should vote for, I have a few things to say on the subject.
I’m talking about the way that we all conduct our personal investment portfolios, as well as the goods and services we buy. I’ve long believed that these everyday activities are a much more important ongoing vote than any one you cast into a ballot box. And today, there’s one vote you should be making above all others.
Because right now, as I write this letter, Ben Bernanke and dozens of other un-elected bureaucrats are deciding how much they want to devalue the dollar.
The mainstream media calls it Quantitative Easing, and whether it’s a $100 billion drop in the bucket, or a $5 trillion printing bonanza, we know what it means in the long run.
The dollars in your pocket, bank account, as well as the dollar denominated worth of your brokerage account, 401K or any other retirement account will be worth less over the next decade than they’re worth today. That is, unless you’re able to find avenues of growth that will keep your net worth growing faster than Bernanke et al can devalue the currency it’s denominated in.
It’s a shameful policy these folks are pursuing, but you need to recognize that it IS the policy of the US Federal Government to devalue the dollar. Regardless of what Tim Geithner says in the short-term, they will devalue the dollar - simply because they have to.
The only other alternative is to default on Treasury debt obligations. But today’s article isn’t about the Federal deficit. I want to give you some actionable recommendations on how to protect yourself from dollar devaluation.
Monday, Forbes magazine columnist William Baldwin wrote an article on the “Eight Ways To Bet Against Ben Bernanke.”
If you read my article Monday (The Wall Street Journal Doesn’t Understand Gold), then you know how I feel about the mainstream media and their ham-fisted efforts to explain a variety of topics related to dollar devaluation.
Similarly, I think Mr. Baldwin’s article misses the mark.
Here are his eight recommendations:
1) Sell bonds
2) Take out a mortgage
3) Buy a house
4) Buy puts on Treasury bonds
5) Buy a Treasury bear fund
6) Buy gold
7) Buy TIPs
8) Buy junk bonds
I agree that people should certainly sell bonds and buy gold - I can even get behind buying a Treasury bear fund - but the rest of the recommendations all involve taking on some form of leverage or high levels of risk.
A better vote for your dollars - besides selling bonds and buying gold - is to make sure your portfolio has exposure to the kinds of stocks that will rise in an inflationary environment.
I’ve talked at length about the kinds of companies I think you should own. Here’s a short list of companies I would buy on weakness. Starting Wednesday, we may see a substantial correction in many of the companies below. If the dollar rallies, these companies will fall - in which case you should be buying.
- Noble Corp (NYSE: NE)
- Freeport MacMoRan (NYSE: FCX)
- Archer Daniels Midland (NYSE: ADM)
- Plum Creek Timber (NYSE: PCL)
- Cresud (Nasdaq: CRESY)
- ExxonMobil (NYSE: XOM)
- BHP Billiton (NYSE: BHP)
- Rio Tinto (NYSE: RTP)
- Imperial Sugar (NYSE: IPSU)
I’d recommend buying these companies on substantial dips if you get the chance. Vote for these companies with your dollars, and I think you’ll survive anything that Bernanke throws at us.
Disclosure: I currently own Exxon, BHP and ADM