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Johan_
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  • Survival Strategies 0 comments
    Apr 14, 2010 7:05 AM

    SugarEver wondered how the preserve your personal wealth ?
    Having survived the financial crash of the last year and a half, I suppose you did on several occasions

    Personally I still kick myself for not having bought stocks at the March 2009 lows.  Looking now at the Dow breaching 11.000, the Nasdaq just a tad away of 2500 and the S&P at 1200 we missed the run-up completely.  Instead we decided back then to invest in gold and oil, which did very well indeed, but not as good as the indexes.

    Regardless of the opportunity missed, we slept well at night knowing little could go wrong.  Oil still makes this world turn and gold, well, with the massive amounts of money created out of thin air all over the world, it was a no-brainer. 

    But let's take a step back for now and try to imagine where we'll be in a couple of years and decide on a top 5 investment opportunities.

    A top spot is reserved for the treasuries.  No, I won't buy them, not even TIPS, we'll short the hell out of them.  Sovereign debt is the THE bubble waiting to pop.  Problems we see in Greece are only a prelude of what is going to happen on a worldwide scale.  Problem there is the timing of course and the order in which the different parts of the world are going to get confronted with the collapse of their sovereign debt.  This will generate massive swings in the forex markets.  We watched the problems in Greece with astonishment.  All of a sudden the Euro comes under pressure and gets sold like there is no tomorrow.  Of course the US Dollar gets appreciated.   Money has to flow somewhere I guess, but knowing the Greek economy represents less than 3% of the European total, one might wonder what happens when Spain or Italy become the next targets of the speculators. 

    Now, shorting sovereign debt obligations is not a simple thing for the individual investor.  There are not a lot of instruments that can be used to accomplish that. We have a number of ETF's that short US debt but that's about it.  Of course shorting American debt is a safe bet as there is NO WAY that the US will meet his debt obligations in the long run, but that doesn't guarantee a profit in the short term.  Imagine a major debt crisis in the coming year in several parts of Europe for instance.  This would create a wall of fear, uncertainty and doubt (NYSEARCA:FUD) which will drive gigantic amounts of money into .... most likely US treasuries.  Not a good thing when you are short these things.  But, nevertheless, in the long run, it's safe to assume that with the increased spending habits of the US, eventually, investors will demand a higher yield and therefore shorting US treasuries should be a safe bet.

    The above mentioned FUD will certainly drive a lot of money to commodities.  The money supply has doubled in about a year time, so it is remarkable that this has not yet translated in a doubling of most commodities (although most of them are at an all time high).  What hasn't happened yet will of course happen over time.

    My favorites of the last couple of years certainly remain in their status.  Gold and Oil both deserve a spot in my top 5.  Oil is a no-brainer, if the (and that's a big IF) the economy would start expanding, we'll see oil above the 140$ mark in no time.  Silver seems OK too.  There is so little supply of silver in the world (and decreasing) that a run on silver could propel it into the stratosphere.  But I have heard these default stories in the silver (and gold) market for so long, that I start to doubt we'll see it in our life time.  Regardless, we'll put all three in our top 5 list.

    So we basically have one spot left on the list.  We could of course choose for copper, uranium, or any other industrial metal, but that would be too easy.  We won't touch stocks either.  They have appreciated too much to have much room left for growth.  We won't short them either because we feel that 'money' (regardless in which currency) will loose value (can you spell inflation ?), so we might have a steady appreciation of the various stock indexes.  No our last spot goes to sugar.  The price of the most basic element of our food chain has been cut in half over the last months and heck you can be sure we'll need some sugar to survive the turbulent times ahead !

    J.
     

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