Prelude to Black Tuesday?

In case you’ve had your head in the sand lately, there has been a massive world-wide sell-off in stocks, spreading from Europe to Australia, Canada, and elsewhere. While the U.S. markets took the day off (Happy Birthday, Dr. King - we sure could use your help right about now), overnight futures in U.S. indices took a massive beating.

I’m sure you’ve heard of the old Chinese curse: “may you live in interesting times.” Well, today looks to be a very interesting day indeed for the markets. Chicken littles all over the Internet are forecasting “Black Tuesday,” a massive market crash the likes of which we haven’t seen in a generation. Meanwhile, Ben Bernake has been frantically pressuring overseas central bankers to inject cash into the markets today to prevent that very scenario. He might even turn on the printing presses and funnel funds into the market to help maintain some artificial strength.

The upshot is, while no one knows for sure what will happen in the markets today, one thing is clear: the U.S. economy is starting to show its soft underbelly, and the steps the Fed is taking to mitigate the problem will only serve to exacerbate its true source - overindulgence in cheap liquidity.

So whichever way the wind blows, the best strategy will be the same - the same as it has been for some time now. Hold assets with real intrinsic value that is not linked to the value of any particular currency. There are plenty to choose from - infrastructure, precious metals, and commodities, just to name a few, but my personal favorite is also the most renewable - Timber.

If there’s a broad market sell-off, I’d take a close look at timber stocks in the aftermath. Timber has already taken an unwarranted smackdown because of fears over the real estate market bust. Guess what? The U.S. is not the only country in the world that uses timber. China faces a massive shortage, and Canada’s timber producers are facing a crisis due to the Northern pine beetle. Any lull in the timber market will be temporary, and a big market crash would be a fantastic opportunity to pick up some bargains in the sector, which you can then hold forever. If you’re sitting on some uninvested cash, watch the fireworks today, then start shopping.

Further, there are a number of timber companies out there that focus exclusively on harvesting cultivated trees, and are good stewards of our forests. Cultivating trees is actually a great way to combat climate change, by the way, as the trees pull carbon from the air, which we can sink into our houses and construction projects. I know many of my fellow environmentalists are used to thinking of loggers as the enemy, but not all of them are. Stay tuned for picks of our favorites.

Stay calm today. Whatever may come, this too shall pass.

Comments

[User 142738:]

You own timber commodities and stocks, don't you? Where's the disclosure statement?

2008 Jan 22 09:54 AM