The Prudent Investor's Forecast and Strategy 2011

Thursday, January 13, 2011

BONDS: The 20-year interest rate downtrend reversed in 4Q10: Short all government bonds (and hope your counter party will remain solvent.)
Rising rates will become the tightening noose for all debtors. Mortgage holders may find comfort by switching to fixed rate contracts as far out as possible.
SHARES: As inflation heats up, go long energy, food stocks (and convert ensuing profits into gold.) Underweight consumer (durables) products in a cool economic environment, short debt-laden financials, especially the "dumb money" insurance sector.
DERIVATIVES: Stay away from all OTC instruments as your contract will ultimately only be worth as much as your counter party can pay. Square all derivatives in disguise like ETFs.
COMMODITIES: Buy silver as it is still 70% away from its nominal high seen in 1980 and has a dual use as money and industrial resource. Take profits once gold:silver ratio has descended to 1:30 and reenter after technical consolidation. All other commodities have reversed and have overshot the mean by now.
CURRENCIES: Buy the real stuff - gold. All other fiat currencies are just a claim on some central bank counter party and historically they have all wrecked their product via inflation in the last 300 years.
Once you have done this handful of trades, turn off the charts, lean back, contemplate the world and check back here in January 2012.


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