Is This Your Portfolio?

RichardSchwartz — Fri, 27 Jun 2008 15:14:00 GMT

WHERE YOU SHOULD STAND TODAY. The Ideal Portfolio (another Schwartz View).

Yep, let me offer up one man’s view of what the ideal portfolio should be today and why:

· Very minimal exposure to the stock market! This major, modern day margin call on institutional investors is causing havoc. I’ve likened this margin call to the one which wiped out many individual investors quickly back after the 1929 stock market crash, only this time around its institutional investors getting slaughtered and thus the process of meeting their margin calls is being stretched out. All are deleveraging their portfolios big time and since the securitized investments killing them are so opaque and illiquid, it’s a terrible, long, drawn out process.

· Where you do have exposure, have some in the Energy Service sector. Business is going to remain strong and money is going to funnel into this sector as long as oil stays up there, even if oil tanks 50%. The world is in now in a new competitive battle to secure our energy futures. Thus companies which help countries like Brazil find and produce oil should do well.

· Where you can, hedge your long stock exposure. One does this by having some inverse mutual funds and/or ETFs (exchange traded funds). Happily today, investors have access to this modern day invention of being able to go short (bet on declines) with inverse investments. You just buy a fund or ETF which goes up as the market goes down. I would recommend having small inverse positions, especially in financials. This allows you to ride through a day like yesterday knowing that a part of your portfolio is rising while your long positions are falling. The next day you check your portfolio’s value and see how you did. That’s what I do each morning. Say the stock market fell -3.00%, like yesterday, & your account lost just -0.20% like my ProFunds managed account did you might figure your hedge is just right. Just tinker with the hedge until you get it right.

· Hold NO BONDS. I’ve been recommending this for some time now. Yes, we may get a deflationary collapse at the end of this 25 year “too much of everything” Kondratieff disinflationary economic backdrop we’ve been in since former Fed chairman Paul Volker broke the back of runaway inflation in the early 1980s. But the world is now experiencing our first return to higher inflation jolt. Thus we’ve started a new bear market in bonds. I can’t help but remember when I first became a stockbroker with Merrill Lynch back in the late 1970s, the client who say she would never, ever buy a bond again, after losing money on bonds going back two or three decades. Well, we’ve had a 25 year bull market in bonds and its over or close. Thus, my recommendation is no bonds. (Except some very short term laddered US Treasuries for income.)

· Hold a little Gold. Yes, some will keep warning of a deflationary collapse ahead, when the economy really tanks and thus say gold will collapse as well. But gold is in a long term uptrend, a bull market, and no one knows quite how it will react in various market and economic scenarios. Buy SPDR Gold Trust (symbol GLD) as opposed to the miners themselves, thus eliminating one unneeded uncertainty. FYI, I’ve seen gold rise and gold sector funds fall, so watch yourselves.

· Hold a little foreign currencies. Again, in today’s modern day investment world, the individual investor can easily bet on foreign currencies … by buying their ETFs or tracking stocks. I’ve been recommending & still am, buying Swiss francs & Japanese yen, symbols FXF and FXY. Both are Big Picture superstar guru Jim Rogers’ picks and are in long term bull markets and dipping now so it’s a good spot to buy in on weakness. Today let me add the Chinese renminbi, symbol CNY, to the buy list since there is a exchange-traded note in existence. Not a fast mover but it’s also in a long term bull market and probably is now one of the most reliable bull markets going.

· Hold a little agricultural commodity position. The middle class global world has grown tremendously, yay!, and thus the general commodity bull market has now spread out to foodstuffs. A larger global middle class, means more and better food is needed, especially increased protein. Food commodities are up so only buy on pullbacks here if you don’t own any now. My picks have been and remain symbols RJA and DBA. Again buy the commodities themselves as much as possible and not the companies which produce such although ETFs like MOO have been doing well to this point. Today, let me add iPath Livestock ETN (symbol COW) to the buy list if I haven’t already, a livestock play. Looks like with corn prices so high, cattle is being killed off (thus one can still get steak and hamburger at $1.99 a pound) because it costs too much to feed ‘em. But that will change too and red meat prices will skyrocket.

· Finally, hold small positions in lots of alternative, clean green energy stocks. I see new fortunes being made by those riding the wave of the US and globe getting off oil. The best way I’ve found to buy these is to keep the shopping list of alternate, clean green stocks I’ve compiled and posted for you back on June 6^th in this space handy. (If you don’t have it email me and I’ll send you a copy.) Buy a bunch of these stocks on weakness. I bought one for myself yesterday.

Disclaimer! I hold or plan on holding many of the ideas recommended above.

Get Back Into Gold!

RichardSchwartz — Wed, 04 Jun 2008 13:19:00 GMT

GOLD VIEW. It’s Time to Buy Back into GOLD! I must say the gold chart looks ripe for a rally and the background economics are screaming rising inflation here in the US and all around the globe, so I would recommend buying back into gold. Gold pulled back from its big Round Number of $1000 in almost perfect fashion for those of us like myself who believe Round Numbers are meaningful & insightful. If you remember gold traded over $1000 an ounce for just two days, on Friday, March 14^th and again on Monday, March 17^th, found that it didn’t have enough buyers to propel it higher and promptly rolled over, sold off and said sayonara to $1000. So it’s been down for the normal three weeks to three months which normally encompasses counterswing rallies to primary down trends . Since then it’s bottomed at $852.70, then at $864.00 and then $877.90. So it’s made a series of higher lows which is bullish. And, as I mentioned earlier, all I see is rising inflation around the world, from here in the US to Europe to Asia to the developing world to the new “frontier” world. Sensible because food and energy are soaring everywhere.

Schwartz View: Since gold reversed direction around the “fateful weekend” when the Fed showed they were backstopping the whole financial system, it just makes sense that if the stock market rally which began around that same time is over or in its last throes, the other counterswings that began the same time may be over as well. One such counterswing has been in gold. So, I recommend buying gold today.

Like always let me recommend buying the gold bullion tracking stock, now called SPDR Gold Trust (symbol GLD) instead of the gold mining companies. Buying GLD takes the added, now unnecessary risk of buying the gold miners themselves out of the mix. Regular readers know I want to take that geopolitical risk out. The recent risk that developing countries all want to renegotiate their contracts with all the mining companies including the gold miners. (And who can blame them?) They want better deals than which they made back when gold was at $250 an ounce. Renegotiating would hurt gold mining profits, so in spite of us having the right investment idea we could lose; you know being in church but in the wrong pew.

Bottom line, I have to think with global wide inflation rearing its head for the first time in some 25 years, gold will surely benefit over the longer run. And since we just pulled back, it’s a good time to get back in. Thus I would buy a little gold here and buy more on weakness, paying close attention to the correct percentage exposure for your own circumstances and also how much you buy each time in. Overall through your gold exposure starting today should be much larger than the normal 3% to 5% exposure that many advisors normally and historically recommend. It’s gold’s time to shine again after being out of favor for 25 or so years. Be sure to get some as it should prove a great hedge against your long portfolio.

Disclaimer! I own a little GLD and plan to buy more although please remember I can switch my views and thus my positions at any time.

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Is This Your Portfolio?

Get Back Into Gold!