With the government running a huge deficit, what investments will have good returns over the next four years?
Currently we are increasing the US deficit by $3.82 billion per day since September 28, 2007 (this does not include the state and local deficits or the federal government unfunded future liabilities of $47 trillion). This will lead to declining value of the $, inflation, and possibly the $ losing its place in the forefront of world currencies.
I would like to find a hedge against inflation and the declining value of the $ like I had with oil when oil prices went from $30 to $140 by using Canadian gas and oil trust companies (ie AAV, PWE, PWI). You got a greater than a 10% dividend along with share price growth (thanks FullStacks and Mr. C for telling me about the Canada Trust). These have become very good trading stocks over the last couple of years provided you know how to use the stop loss order. FullStacks made a lot of money selling AAV when oil hit $80 and buying when it got near $70.
I have started to look at commodity ETF index stocks as an inflation hedge, for example PowerShares DB Base Metals (DBB), DB Agriculture Fund (DBA) and other commodity funds. Is the better investment non US currencies like the BRIC countries? Please comment on what you think is the best approach.
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As we have discussed before, it's good to get paid while you wait so having some dividend component is always a plus and satisfied an emotional component when the stock goes sideways or down for a while. Once you got the money, they cannot take it back.
ReplyDeleteI have turned quite sour on the US economy. The press and the geov'ment would have you believe we will recover like a lightning bolt and everything will be ok like it was before. But these are time of the new normal and with the gov'ment printing money at record speeds, people out of work, dollar getting pounded, these are not the good old days.
It is hard to compete against centrally managed economies that can turn on a dime like the Chinese and to a lesser extent India and Brazil. Inthe past, we could look at the Russian experiment and say, it's not gonna work. But the Chinese economy is growing and I would overweight it and the rest of Asia minus Japan. I like Singapore, Korea, Thailand and China and have recently added a little to existing positions.
I am also looking at international dividend plays. The play is consistent dividends paids in a foreign currency that is appreciating. Many of the companies held by these ETFs are the country mega-companies that are private but have the clout of a state-owned enterprise. This is how the Koreans do it.
In summary, Asian minus Japan (AAXJ), Singapore (EWS), Korea (EWY), China/Brazil (especially the China/brazil sector plays) and the international dividends. I'm still investigating which ETF to use here. And yes, I'l always looking for a Old/gas income trust entry or re-entry point.
PS. I really like Canada but it's too closely tied to the US from a trade perspective.