Back in 2005 I commented in an article that “my investment portfolio is almost exclusively invested in a basket of commodities (gold, silver, potash, uranium and crude oil) of which the bulk is precious metals. A third of my investments are in gold and silver bullion and a range of individual commodity-related stocks, from the very large producers to the very early stage small junior exploration companies, or their long-term warrants where they exist. Two thirds are in precious metals ETFs.”
It is now 2011 and my rationale for doing what I did back then has stood the test of time and, I expect, will continue to do so for many more years to come.
Let me explain why I still think such a basket of commodity-related assets is the only way to go. I also encourage you to read my recent article entitled “Confessions of a Conservative Investor” here in which I explain why I believe there is nothing speculative about investing in commodities and why, in fact, they are the ideal investments for cautious investors.
From my perspective the economic and political risks on the global horizon are even more serious than they were a few years ago. Therefore, I still believe that the best way to preserve my equity, and secondarily, to grow it, is to invest in precious metals, energy and agriculture. Other sectors like the stock and bond markets are currently either overpriced by historical standards and/or highly vulnerable and, as such, the downside risk of precious metals, energy, agriculture and even most base metals is far less than those alternatives.
What Will Continue to Make Investing in Commodities a Winner?
Many events and circumstances could be the trigger that causes the system to implode, explode or go off on some tangent, It will probably be a sudden factor which will trigger yet others such as a leveraged hedge fund or sovereign debt collapse, unexpected military aggression or major terrorist activity (such as the sinking of a petrol ship coming through Hormuz or Malacca straits or perhaps even the Suez Canal.) Whatever unfolds will definitely cause currency gyrations and imbalances which will all cause public opinion and confidence to shrink dramatically. It is that last component which is the truly ugly part for which manipulation by the power brokers will be ineffective to counteract.
There is virtually nothing on the economic and political horizon to tell me that any country – anywhere - is changing course. The U.S. with all of its current policies, practices and scary economic and financial realities continues to operate as if it is business as usual. Moreover, there is absolutely nothing in terms of facts to suggest that the system will get any better. U.S. politicians, for example, only have a time horizon spanning to the next election – 6 years for Senators, 4 for the President and 2 for Congressmen - with the calendar always shortening. Their goal to is to be reelected, not make waves, always bribe the voter with their own, or borrowed, money and never ever tell the ignorant masses, or the fifty percent who actually vote, the ugly truth because they are sure to turn on the messenger.
Denial always trumps an acceptance of the truth even when one is endorsing a system designed to leave one’s kids with bad values and worse circumstances than we have now. The public will always opt for the pleasure of the moment rather than deny themselves to ensure a better future for themselves and/or their children. Proof of that is everywhere you look – home “owners’ with no equity in their homes and mega-sized debts to the banks, credit card debt often in the tens of thousands of dollars, leased cars in the driveway, expensive holidays they can’t afford, shopping sprees with money they don’t have, little or no savings in their bank account and either no retirement savings plans at all or ones that are totally under-funded - all topped off by a major aversion to paying their fair share of taxes to maintain the benefits their various levels of government provide. Ah, the good life!
Conclusion
So how do I end this rant? Economic and political realities are grim and getting worse. There is scant evidence of any serious and realistic policy initiatives. If there were the public would reject them because it would invariably entail sacrifice and deferral of an enhanced lifestyle until some unspecified future date.
My best advice is to put all (or almost all) your investment eggs (dollars) into a basket of precious metals (gold and silver), agricultural (potash) and energy (uranium and crude oil) assets including a mix of bullion, individual stocks and/or their associated long-term warrants (where available) and ETFs. Doing so will preserve what monies you have and to make the most of the dire circumstances many “first world” nations find themselves in today – and will to an even greater degree in the months and years to come. The U.S., the UK, and most of Europe for that matter, get all the media attention but smug Canadians and Australians, and others too, are not immune to the political and economic/financial uncertainties that abound. Remember, many people hatched their future fortunes by judicious acquisitions in the 1930′s when everything looked bleak so it is not too late for you to take both protective and profitable action today.
I conclude this rant by asking two simple questions: “Have you invested to the maximum in precious metals, energy and agriculture assets and, in particular, in gold and silver based investments?” and “If not, what are you waiting for?”
