by William Patalon
III
Executive Editor, Money
Morning
Editor's
Note:
Earlier today, Money Morning released the following special report. It's a
way to tap into several asset classes expected to outperform over the next 12 to
18 months. Follow their advice and you’ll essentially build your very own "power
mutual fund"... from biotech and gold to "Barons" and the
BRICs.
Dear Investment
U Reader,
There's an old Wall Street adage
that tells us "the trend is your friend."
And there's a witty bit of wisdom
we've developed here at Money Morning to help guide
our readers that says: "Go global or go home."
Combine those two and you'll
discover that you've got yourself one very strong investing strategy – if you
choose the right trends, that is.
Surprisingly, that's nowhere near
as difficult as most investors think. All you have to do is to look around you,
and study the forces that are at work in the markets each day. If you do that on
a consistent basis, you'll soon discover that no matter what kind of "trick
play" the financial markets throw at you, you'll be able to side-step the tackle
attempt, avoid being thrown for a loss – and will actually end up scoring some
hefty profits for your portfolio.
To show you what I mean, let's
take a quick look at the markets right now...
The New
World
Disorder
For decades, America
's Wall
Street was the financial center of the world, if not the universe. That New
York-centric viewpoint was so pervasive that one of the most recognizable
investment aphorisms to emerge was the ubiquitous: "When Wall Street sneezes,
the rest of the world catches a cold."
But as we've all seen during the
wild markets we've had to navigate of late, that's not true any longer – and may
never be again.
For the first time in modern
history, the U.S.
economy finds itself back with
the masses, flying coach instead of first class. We've all heard the statistics.
For
instance:
- From
2005 to 2010 alone, worldwide wealth will soar from $118 trillion to more than
$200 trillion – with the newly capitalist markets of Asia and
Europe
accounting for the biggest share...
- Over the
next 25 years,
America
's share of the worldwide
economic pie will slip from 28% to 24%...
- While
during that same stretch,
Asia
's share of the
global market will almost double – meaning it will account for a whopping 55% of
the global economy by 2030.
- But
those are just statistics. A confluence of powerful forces is responsible for
those changes. So let's take a look at some of the global trends that are the
actual catalysts behind those numbers.
Key among
them:
- The
emergence of new economic heavyweights such as China and India, which are now
competing for the capital, the jobs and the business contracts that U.S.
companies for decades had almost all to themselves.
- The
perfection of new telecommunications technologies that are making national
boundaries largely irrelevant from a business standpoint, while also enabling
global corporations to shift labor and capital wherever it's needed around the
world.
- The
emergence of new capital sources; in particular, the so-called "sovereign wealth
funds" – the massive state-run pools of investment capital that are now
operating like venture capital funds with a worldwide
reach.
- A global
credit crisis – which grew out of a
U.S.
housing-market bubble – that continues to
wreak havoc on the U.S.
economy and the U.S.
dollar.
- An
unprecedented escalation in global energy and commodity prices that, combined
with the weak U.S. greenback, is allowing inflationary forces to take hold in
the American market for the first time in nearly three
decades.
Taken at face value, such trends
are terribly unsettling for U.S.
consumers and investors alike.
And the unease in this country is growing at an alarming rate. Believe me, we
here at Money
Morning know that as well as anyone. As our team of global
investing experts beats the bushes in search of new trends and new investing
opportunities to bring your way, we hear these concerns voiced over and over
again.
We certainly understand folks
being worried. After all, with change comes uncertainty. And uncertainty can
breed worry, if not fear.
For those of you who are
understandably fearful, I'll ask you to consider one other longtime Wall Street
adage: With change comes opportunity.
Global Profit Opportunities
Abound
With all the global changes we
see, we also see plenty of opportunity – especially for U.S.
investors.
While I understand if many investors can only see a burly group of blockers
standing between them and the profits they'd dearly love to lock in, we see a
playing field that's wide open all the way to the end
zone.
All you have to do is call the
right plays – by picking the right trends. Here are 10 that are worth watching –
and capitalizing on – as they play out in the global capital markets at
different times over the next 12 months or more.
1. Cash in on the Cash
Barons: Sovereign wealth funds from China
and the Middle
East
are pouring billions into stocks too many investors would
rather ignore.
2. Energize with
Energy: Energy will be a recurrent theme in the
months to come – and not just in terms of oil and gasoline. Crude oil will remain in the forefront of the profit plays to
come. But that's not all: Alternative energy opportunities such as uranium and
so-called "green energy" investments will benefit from soaring prices for
conventional energy sources. When it comes to these profit plays, it will pay to
keep all your bases covered.
3. Buy into
Buyouts: Mergers and acquisitions, management buyouts
and private-equity deals helped fuel the record run in the U.S.
stocks in
the first half of 2007. The subprime-mortgage mess and ensuing credit crisis
will make it tougher to do deals in the next 12 months, but the choicest buyouts
still will get done. (See today's Crib Sheet below for two
ideas.)
4. Build with
Biotech: This isn't your father's biotech sector. No
longer are we talking only about the "Big Pharma" drug-development firms. Some
of the biggest players are now trying to solve the world's food and fuel
shortages – with some notable successes. With special, more-environmentally
friendly herbicides and higher-yielding, genetically engineered crop seeds,
these companies have already engineered big increases in sales and profits – and
there's a lot more to come.
5. Home in on
Housing: Housing's down, but it'll never be out. The
real estate turnaround is still some time off, but this sector
isn't going to go away. It'll take careful and patient investing to profit here,
but keep the sector on your radar screen – if for no other reason than to use it
as a barometer for the rest of the currently moribund U.S.
economy.
6. Invest in
Income: Studies show time and again that income positions are key to any portfolio's success. And those
same studies show that if you call the dividend play during a bearish market,
your portfolio will easily beat "the spread" – in this case, the market averages
as measured by the Standard & Poor's 500 Index and Dow Jones Industrial
Average. And if you can't decide between stocks or bonds for income, don't flip
– our report covers both sides of the coin.
7. Hit the
"BRICs": BRIC is a Goldman Sachs Group Inc. (GS)
acronym for "Brazil
,
Russia
, India
and China
." Three of
the four – Brazil
,
India
and China
– are not
to be ignored in the months to come. After the wild ride Chinese stocks have
provided in recent months, too many U.S.
investors are ready to give up
on the Red Dragon. Don't make that mistake. We've seen some life in
China
's stock market in recent days,
and there will be plenty of ways to profit from that emerging economic colossus,
some of which involve only moderate risk. [To find out how you can obtain a free
copy of investing guru Jim Roger's new
bestseller, "A
Bull in China," which details investing strategies
for that burgeoning market, please go here].
8. Go for
Gold: The yellow metal has enjoyed a record run. And
it's subsequently dropped back. But don't let that disappoint you: With global
demand for commodities of all kinds soaring, there's plenty of yardage left on
this play. Besides, if inflation escalates as many experts expect, gold will provide
a terrific portfolio hedge.
9. Couple up With
Commodities: The gangbusters global growth that's
causing gold and crude oil prices to "go long" is having the same effect on such
commodities as wheat, corn and soybeans. Even Jim Rogers says the global demand for commodities is only
going to escalate, meaning this is a play you can call now with a high degree of
confidence and score again and again.
10. Don't Give up on the
Greenback: The U.S. dollar has been sinking against
virtually every other major currency, a trend that could well continue for some
time to come. That doesn't mean you should ignore the greenback. Run a reverse
and look for ways to profit on its pain. Not only will you score now, you'll be
focused in and ready to profit when the playing field changes and the U.S. greenback reverses course on its own run for the end
zone.
In short, think of this list as
your own personal "mutual fund" of investing strategies. By mutual fund, I mean
that this is a list of potential profit plays that are worth watching – and
probably investing in – over the next 12 to 18 months. Like a mutual fund, it's
a diverse list, meaning that different trends will be working for you at
different times. But that's okay – it means you're more likely to be involved in
whatever trend happens to be hot at the time.
One last point that's worth
noting: By advocating investments in food and commodities – the most
controversial of topics right now – we're not talking about acting as
profiteers. We're talking about taking steps to protect yourself and your family
from the very real fallout caused by the soaring prices. It's a trend that you
cannot stop. But you can take steps to reduce the damage it inflicts on your
family budget, and on your ultimate retirement.
William (Bill)
Patalon III is the Managing Editor and Senior Research Analyst
for Money
Morning – a free service that helps investors profit from
the "seismic shift" in the global economy. Before he moved into the
investment-research business in December 2005, Patalon spent 22 years as a
journalist, covering financial news as a reporter, columnist, and editor that
included stints with Gannett Co. Inc., and The Baltimore
Sun. To get Money Morning before the
market opens each day, just sign up
here. They'll immediately send you their free report, The
China
Solar Boom: 8 Stocks Set to
Run.
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