3 Investment Ideas for the Rest of 2008 and 2009 28 comments
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Sometimes obvious economics can lead us to profitable investment strategies. I think a few such opportunities exist right now and I’d like to share them with my readers. If you have other ideas or comments on mine, please share. Why pass up a potential way to make money?
First, one might consider becoming bullish on the US dollar. Two contributing factors to the dollar’s recent weakness have been the extended period of low interest rates and the enormous trade deficit we run here in the US. Because of how bad inflation is right now, it’s more than likely the Fed will raise rates at one of their next meetings. This action would curb inflation by making dollars more expensive to borrow. The lower supply of dollars will raise their value against other major currencies such as the Euro and the Yen.
Furthermore, if we eventually reduce our reliance on foreign oil, which seems just a matter of time, we can avoid currency-weakening behaviors such as buying hundreds of billions of dollars worth of oil from Middle Eastern countries.
Some of my readers may not realize that the commodity boom which we’re currently in is fueled by a weak dollar. This bubble would more than likely pop with some strength in the greenback. It’s also likely that our trade deficit will start to turn during 2009. Foreigners have recognized the opportunity to buy goods such as real estate and clothing at a steep discount. This usually evens out the trade balance after a few years.
Second, consider putting together a portfolio of alternative energy stocks. Does anybody really believe that oil prices are going back down to where they were five years ago? Even if they were, I think the case for alternative energy would be just as strong. Economics show us that developing countries, specifically India and China, will consume more oil in the future. For societies to move forward, they must have constant sources of energy, preferably those which are cheap, clean, and safe. Oil doesn’t pass that test in my eyes and it remains the most popular energy choice by far.
Where can you invest? Try solar, wind, and nuclear power. We could discuss each of these sources in terms of their price and efficiency, but they’re all pretty good. Think about electric. It’s not expensive nor does it pollute the environment the way burning fossil fuels does. If you like this idea, be careful about how you speculate on the sector. It seems prudent to purchase a fund or trust which invests in a diversified group of alternative energy companies with proven earnings histories. This may be a safe play from a risk/reward standpoint.
Third, consider how you can make money from demographic shifts. Specifically, we have millions of baby boomers, the first round of which started retiring during 2007. Certain industries will undoubtedly benefit from this. Which sector do you think or believe will grow faster; automobile producers in the US or healthcare firms which manufacture drugs, manage health care plans and own hospitals? What else might the baby boomers spend their trillions on from 2010 to 2020? Maybe golf? Real estate in Florida? Long-term care facilities? Probably all of the above.
We’ve also been seeing a trend in the US of smaller families. This has been following fears about the dramatic costs of raising children, saving for education and not ending up broke during retirement. Might the producers of high-end baby clothing and accessories struggle a bit? It would make sense. The point is that we have official statistics about demographics. We should be able to make logical deductions by studying these things which give us an advantage over just throwing money into random parts of the market.
These are my ideas for the day. Implementing them properly requires doing a little homework. Always diversify your portfolio so you don’t take on too much risk in any one area. When picking your investment products, you may also want to consider those which are inexpensive and liquid in your search.
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This article has 28 comments:
Where do you think electricity comes from? Magic?
I also agree that the carbon footprint of electricity is lower than burning fossil fuels. However electricity generation methods (coal, gas, and oil are the main methods) are certainly not carbon footprint neutral -- but nascent technologies and methods haven't nearly reached wide spread commercialization.
AE sources will be a hot investment area for in the next decade, but placing a bet now on one or in a AE portfolio, would be akin to betting on black or red at the roulette table....
and you need to go to some business school
Also, as for alternative energy...well...no one really knows which companies will emerge on top. This may make finding a winner particularly difficult...
FAN / IYH / IYR / NLR / PBW / PPH / UUP
*see the listing directly below the title...
TO CLARIFY: It is the editor, and not Mr. Russell, who selects the ticker symbols that appear at the top of the article. They are chosen to make an article that would in our opinion be of interest to followers of those stocks easier for them to find. - SA Editor
Then if stocks go down, he sends another newsletter to half of the 10,000 down group, saying "I told you so, now they're going down again!"; and to the other half "stocks are now going up!" Repeat the process again and again.
Once he has selected down to 1,000 who think he is right all the time, then he asks them for $1,000 per year for access to his prescient and 100% accurate advice. Voila!
"Think about electric......"
"For societies to move forward, they must have constant sources of energy, preferably those which are cheap, clean, and safe"
Not a hint of research, and not a hint of any kind of vision as to what asset class might do well over the next few years.
You cannot replace oil with wind turbines.
You cannot replace oil with solar panels.
Electric energy is not associated with transportation energy (i.e. planes trains and automobiles).
> jack
Long term there is talk of more use of natural gas and electricity being use in transportation. If so, we will need more alternative fuels.
Presently there is a big battle looming between the solar people and the environmentalist. The solar people are trying to permit millions of acre's of desert land, that if converted into solar units would be capable, theoretically, of creating twice the output that California uses
I thought most of the electric in this country was produced
by coal, dirty coal, plants.
What am I missing
The BRIC nations (especial China and India) will continue to consume oil and as those cultures middle class grows so will the demand for oil and hence keeping the price where it is if not higher. These above mentioned nations are somewhat primitive in their energy methods, so don't plan on seeing solar, wind or any other alternative energy sources.
You discussed footprint energy sources, but my friend COAL leaves a huge footprint and is highly used in the electric market.
You discussed trending smaller families and the reasons why, but i think you need to do your homework. Look at the different ethnic cultures here and the baby trends within them and you'll find you're wrong. Not to mention they just announced on CNN last week about the new BOOM in babys at the current time.
You talk about the dollar, look back to the 70's and 80's and see if the dollar trend during that period matched what you're predicting.
You talked about the weak dollar, country deficit and the potential to reverse because foreigners will buy more realestate and clothing. Number one, foreigners already own too much of country (not sure much is left for them) and are the 2 mentioned segments really big enough to reverse the deficit? I think not.
You're right on wind and solar plays, but you didn't mention any so i will; ESLR- 2009 after their done losing money this year, FSLR- very profitable company in a sector that will offer opportunity in the future, CPST- speculative wind play, but long term and it's a penny stock right now.
I think if people had strong stomachs and the time to research future opportunities they'll fish out good financials that have been beaten back severly and are most likely to pull out of this mess (American Express, Wells Fargo & B of A).
Lastly, when the real estate market turns around within the next few years, so will the retailers that home owners need LOW and HD. These 2 companies are strong, have great balance sheets and are great long term plays.
better luck next time young man, but don't give up your efforts are appreciated!
Skee
The Fed is not going to raise rates this year. I'd stake my life on it. Next year, maybe, but not early and not by much. Between the two, I'd bet that the Fed's next move will be down, not up. And until the dollar makes a convincing break above 74, the technicals aren't any better than the fundamentals (I needn't bother explaining all the negatives on the dollar; if you aren't familiar with the story you've been living under a rock) so all this short-term dollar bullishness is just hot air. In the very long run, all assets are priced in gold and must be weighed against it. Bullish on the dollar, on those terms? Surely not. So against what, and on what time scale, are you bullish on the dollar? The case you present doesn't say, and the only reasons you offer are based on either dangerously risky assumptions or blind hope.
From a contrarian perspective, I sure have seen a lot of "bullish on the dollar" hype lately, despite very little movement. If everyone likely to become bullish on the dollar has already become so, yet it's risen less than 4% off its all-time low and remains in the same trading range it's occupied for months, exactly how is it going to gain further? Everyone is going to sell euros? Maybe, buy why sell them for dollars?
don't take any of these comments personally. anyone can be a critic. they should have commended you for welcoming suggestions, for opening a topic to discussion and making some general predictions. instead, they used you for a punching bag.
let me remind the readers that anyone can offer up thoughts and you are all welcome to do so. if you disagree with the author, just stick to constructive criticism and lead the discussion in what you perceive to be the correct direction. don't get personal. it detracts from the subject and says more about you than it does about the author.
sincerely,
curious (mr manners) cat
As a resluts of this inflation will come down. There will be demand for product and services. Investmet will improve and there will be more job opportunities. Many sectors will recover.Finally we will see recovery in the financil sector and credit market.
Sell US Bonds, buy agriculture. Fine investment ideas in a JIM ROGERS blog at jimrogers-investments....
The alternative energy stocks seems a good idea thought.