A Legendary Investor's Best Advice on Protecting Your Wealth
By Dr. Steve Sjuggerud
Friday, June 5, 2009
Earlier this week, Chinese communists laughed at us. Now Venezuela's socialist leader, Hugo Chavez, is laughing at us...
In the last few years, Chavez's government has taken (actually stolen, in many cases) majority stakes in just about every large industry in Venezuela. As you might expect under a socialist regime, Venezuela is suffering political corruption, no growth, high unemployment, and rampant inflation.
But President Chavez joked that Obama is more socialist than he is these days. On a national TV broadcast, Chavez told his fellow Venezuelans, "Hey, Obama has just nationalized nothing more and nothing less than General Motors. Comrade Obama! Hey Fidel, we must be careful or we are going to end up to his right!"
Take GM as a simple example. The plan is to invest $50 billion of taxpayer money to own 60% of GM. Based on that simple math, 100% of GM should be worth about $90 billion. In short, for taxpayers to make a 10% profit on this investment, the total enterprise value of GM would have to rise to $100 billion.
What's $100 billion? For reference, the enterprise values of Google and Apple are around $100 billion. Microsoft's is a bit larger, at $171 billion. It's hard for me to imagine GM would ever be worth what Google and Apple are worth... particularly when GM is owned by the government and unions.
In his monthly Investment Outlook newsletter, legendary investor Bill Gross explains that thanks to more taxes to pay for a near-infinite number of government boondoggles like GM... plus more government regulation to save us from ourselves... plus more government limits on executive pay, "only the most skillful – or the shadiest," will get rich in the future.
Gross says thanks to this increase in government in our lives "investors should expect considerably lower rates of return than what they grew accustomed to only a few years ago."
America is in trouble. "It is probable that trillion dollar deficits are here to stay," Gross says. But there's still opportunity out there...
Gross' big investment secret over the last 12 months has been to invest where the governments invest, only get there first. Looking ahead, Gross believes big investors in U.S. bonds – like China – will soon start to spread their reserves into other assets outside the dollar.
It's a simple matter of diversification. You should do the same, before they get there.
The likely choices for China and others in a similar situation are gold and other currencies that pay interest. If you have 100% of your cash in dollars – if you own no gold and nothing that trades outside the U.S. – then you're not diversified at all.
Staying 100% in the U.S. dollar may have worked out OK in the past. But with the mountain of government spending and record trillion-dollar deficits going forward as far as the eye can see, tomorrow won't look like yesterday.
At DailyWealth, we try to find opportunity in crisis. In the last few months, we've gotten you into stock markets around the world that have soared, like Hong Kong, India, and Russia.
We've gotten you into safe high-income investments, like Brazilian bonds and virtual banks. Even just yesterday, Chris Mayer showed us ways to take advantage of the government's coming carbon tax.
Times will be tough going forward, as legendary investor Bill Gross reminds us. But here at DailyWealth, we promise to continue to show you how to profit every step of the way.
Right now, we'd start with Gross' suggestion to diversify some of your money outside the U.S. dollar.
Good investing,
Steve |
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IT'S INCREDIBLE THESE STOCKS ARE EVEN ALIVE
This week's "Wow... I had no idea" chart: the past year's trading in the PowerShares Retail ETF (PMR).
The PMR is an easy way to keep tabs on the state of American retail. This fund holds a balanced assortment of the nation's "sellers of stuff." Major holdings include Gap, Bed Bath & Beyond, Amazon, Best Buy, Wal-Mart, and Kohl's. Now here's the "I had no idea" part...
Despite the recession... despite an epic housing crash... despite the biggest destruction of stock market wealth in generations... despite record unemployment numbers... the PMR is among the market's top-performing funds over the past 12 months... down just 6%. It has "lost less" than oil stocks, clean energy stocks, tech stocks, infrastructure stocks, defense stocks, and just about any other sector you can think of.
It's been said that after a global nuclear war, two hardy species will survive to inherit the Earth: cockroaches and the American consumer. As you can see from today's chart, this statement holds a good amount of truth.
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As Wal-Mart opens about 150 new or expanded stores in the U.S. in 2009, the company expects to hire about 22,000 people for new positions.
Earlier this year, the company shared more than $2 billion with its workers through bonuses, profit sharing and payments into the company 401(k) plan.
Wal-Mart has more than 2.1 million employees in the U.S. and abroad. The company had sales last fiscal year of $401 billion.
– USA Today
Crude oil prices rose by more than $1 on Thursday, rebounding after a sharp fall in the previous session and leading a rally across commodity markets.
Goldman Sachs, Wall Street's largest commodities dealer, raised its oil price target for the end of 2009 to $85 a barrel, from a previous projection of $65 a barrel, and said prices could flirt with the $100 level by the end of 2010.
Goldman said that the second half of 2010 was likely to see a return to energy shortages as dwindling spare capacity among Opec producers would be unable to meet rising demand as non-Opec production growth would be restricted by limited investment in infrastructure.
– Financial Times
During an NBC news special, President Obama showed Brian Williams what tricks his new puppy Bo could do.
In fact, Bo has already learned to sit up and beg for federal bailout money.
– Conan O'Brien
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