Of course, gold immediately jumps to mind for many, and there is no argument that a 6% up to 10% (15% if you feel flush or extremely anxiety-ridden about that “hyperinflation” which also refuses to show up in the headlines) could be a prudent way to go about such protection. There are however – in the opinion of Investment Daily’s Roger Conrad – at least four superior US dollar hedges also available to you if you feel the need for dollar-insurance.
First off, Mr. Conrad mentions the…loonie. O, Canada! Yes, our currency, says Mr. Conrad, will generally follow energy prices higher and despite occasional setbacks against its US sister, our buck could offer better shelter than your buck. Ditto the Aussie one – it has been a “major winner” against the greenback during the past decade. And, yes, even the currently beleaguered euro could stage a comeback and outperform the US fiat. Recall that a decade ago the common currency of the Old World was worth 90 cents and that it traded near $1.60 just four years ago. Mr. Conrad also proposes taking a look at various dividend-yielding equities from the aforementioned countries as well.
While on the topic of stocks, let us not forget good old US ones. As it turns out (at least up to this moment in 2012) US stocks (see: the S&P 500) are leading every major asset class in performance. In fact, American stocks are outperforming every other competing asset for the first time in 17 years this year. To wit: the S&P has posted a 15.2% YTD gain while, for example, emerging market equities, gold, and US Treasuries have recorded gains of only 11.8, 10.9, and 2.6 percent respectively.
Contrary to the ever-present market doomsday predictions being offered in certain newsletters, Wall Street strategists opine that we might witness new highs in the S&P in 2013. How high is "high?" – take the 1,585 level as a possibility. Of course, on the road to such potential summits, one will also have to contend with days such as today – as of this writing, Wall Street was on track to post a sharply lower opening owing to “earnings-watch Tuesday.” Bellwether DuPont’s earnings hit the skids and others such as UPS, Xerox and Radio Shack did not fare too well either.
Still, the Dow – near 13,350 – is more than twice as high as it was in the dark days of 2009 and is only some 700+ points away from its all-time peak. It must also be mentioned that tandem gains in the Dow and in gold – very much on display since 2009 – are not the normal order of the day in the investment universe. Gold is supposed to offer shelter from a sharply declining stock market, from a sharply falling dollar, from alarmingly high inflation rates. None of these have been an issue and therefore certain rhetorical questions need to be posed. But we will leave those for another day…
Until next time,