To help keep my focus in hard times, I come up with a theme. Here are some pet themes that could also serve as fearless forecasts for the coming months.
1. All That Glitters
Gold is a portfolio’s insurance policy in case of a Black Swan (i.e., an unforeseen, disastrous event). As the Fed prints more money to fund bailout and stimulus programs, inflation becomes a threat. The US dollar will weaken as China diversifies its reserves from American debt. Gold serves as a hedge against inflation and the falling dollar.
2. Eat, Drink, and Be Merry
Food and water may become scarce due to climate change. Fertilizer may be the new gold.
3. Power Hungry
China is the biggest energy user in its march towards industrialization. Oil, being priced in dollars, may rise as the dollar falls. Coal—a cheap source of energy—is needed to power Chinese cities, especially the steel industry. The problem is the price of coal energy may rise due to emission laws.
4. Hard Core
Commodities, like metals, are hard currencies; it is advisable to buy hard currency in times of paper uncertainty. Infrastructure will benefit from massive stimulus packages in the US and China. Emerging economies need houses for new homebuyers and roads for more and more motorists.
5. Green Is Cool
Saving the planet is cool; global warming is, well, uncool (pardon the pun). High profile celebrities are using hybrids and leaders are pushing reforms to cool Planet Earth. Green is in and the carbon credit market will provide economic incentives that will benefit our planet.
6. Knowledge Channel
Information is power. He who holds the right information at the right time and knows how to use it will wield the power. The channel of info distribution is key.
7. Be Content
Content will transform how people behave in droves. Content specialized movies, shows, and sports are instantaneously transported via theaters, satellites, and cable into the minds of millions. This content changes the way we dress, talk, think, and live. People become culture vultures as they absorb practices from faraway places and assimilate these into their lifestyles.
8. Last Bank Standing
What doesn’t kill you, makes you stronger. Banks that survived the Wall Street crisis and global financial meltdown will flourish as they grab market shares from the fallen.
9. Home, Sweet Home
The subprime crisis has battered homebuilders into way below ground level. When home prices stop falling, there will be irresistible bargains.
10. New Kids on the Block
Emerging economies—such as China, India, and Brazil—have, thus far, proven resilient amid the global economic crisis. They will be the first to recover.
Remember that the right timing in investing is an oxymoron as it is impossible to time the market and find the exact bottom. The keyword is CONFIDENCE. Watch for three important confidence signals:
- A rise in consumer spending
- US house prices that stop falling
- Credit activity that normalizes as the saving-to-loan spread shrinks
Print ed: 07/09