December 20, 2010

Three Investment Themes for 2011

1) US dollar demise: Schiff does not see much safety in the US dollar. Recently we saw the long end of rates rising because the bond vigilantes are coming out of a coma as they realize the Fed is out of ammunition here. All the Fed can do is try to boost the economy artificially with cheap money; they brought interest rates down to zero, they couldn't do anything else so they tried quantitative easing to try to get the long rates to go down but instead they shot up (see 30 Year T-Bond rates) -- it was a complete failure and now much higher interest rates are in order (The Fed would argue the rates are up because the outlook for the economy is more favorable). In response all the US will do is keep borrowing and printing more money which is not good for the economy and not good for the dollar. Schiff thinks the bear market in bonds is finally here with legs to it and that foreigners will not want to keep dollars as the Fed prints cash. Schiff says it is not just a dollar collapse, it is a bond collapse too; "avoid any kind of long term bonds, avoid treasuries, and avoid municipal bonds."

2) Buy emerging markets and foreign currencies: Stay invested in companies that are exposed to the growth that is occurring outside the USA; you want to look at the new emerging consumers, the people that have been saving their money and producing -- those are the consumers of the future. You have to stay with businesses that are going to benefit from this change in global wealth as the world moves away from a US centric model towards other nations. Schiff is focusing on Asia where people work hard, are producing and have savings. You want to invest around the world where there is legitimate economic growth based on savings, under consumption, and capital investment so you get a lot of value and you stay out of the US dollar - because when you are investing abroad not only do you get the growth of those stocks you get protection; foreign stocks with foreign earnings offers you protection from US dollars demise. Schiff is also focusing on countries that have a lot of natural resources that they are able to export to take advantage of the strength in other markets.

3) Buy precious metals and commodities: The Fed will print a lot of money to slow the rise of interest rates and that will be terrible for the dollar so you will want to own the precious metals - stay with gold, stay with silver.

Related: Market Vectors Gold Miners ETF (NYSE:GDX), SPDR Gold Trust (ETF) (NYSE:GLD), iShares Silver Trust (ETF) (NYSE:SLV), ProShares UltraShort 20+ Year Trea (ETF) (NYSE:TBT), iShares Barclays 20+ Yr Treas.Bond (ETF) (NYSE:TLT), iShares Lehman 7-10 Yr Treas. Bond (ETF) (NYSE:IEF), PowerShares DB Agriculture Fund (NYSE:DBA), Powershares DB Base Metals Fund (ETF) (NYSE:DBB), United States Oil Fund LP (ETF) (NYSE:USO), iShares MSCI Emerging Markets Indx (ETF) (NYSE:EEM), iShares MSCI Brazil Index (ETF) (NYSE:EWZ), iShares FTSE/Xinhua China 25 Index (ETF) (NYSE:FXI)


Peter Schiff`s comments on the economy, stock markets, politics and gold. Schiff is the renowned writer of the bestseller Crash Proof: How to Profit from the Coming Economic Collapse.
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