I’ve been on television and radio, as well as in live conferences lately giving my mid-year investment update. Due to so many requests, I’m posting the update today. Just remember that there’s no such thing as a safe investment and that any investment advice is something that must be evaluated by individuals as to what will work best for them personally.
Also, remember that before you invest in the stock market, an ETF or buy Gold as an investment, make sure that you’ve paid off all consumer debt, have funded your 401(k), built up a basic savings account with six months of income and funded an IRA.
What we know is true:
- The bloom has falloff the rose in Europe. The market seems to be pricing in a 50% chance of a “bad outcome” –thus the current market pricing.
- The end of disparities has seemingly brought US eco numbers down to earth. (Still not terrible).
- US corporate balance sheets are at a 50-year high.
- US equity valuation multiples are at a multi-decade low.
- US GDP now estimated @ 2%. GDP is simply NOT in recovery mode yet.
- Although things appear bad, keep in mind two things: First, a lot of terrible news has already been digested in the market (and the market has adjusted to receive that news). Two, setting yourself up for Armageddon has, thus far, never worked out very well.
- Housing Market: The sheer fact that median rental yields are more than 1.5% higher than the average 30-year fixed rate mortgage should help support property prices. This suggest more residential property investment is becoming cash flow positive meaning there is scope for rents to cover interest and principal. I would recommend the SPDR Homebuilders ETX (XHB) for passive exposure to the US housing recovery.
- Oil: Brent crude prices have fallen $25 (WTI 40%) per barrel from the recent highs earlier this year. The recent price drop has been driver by: soft global supply demand, risk sell off due to global macro uncertainty, liquidation of substantial derivatives positions. I expect global crude prices will recover and would recommend: BP
- Gold: My friend, Larry Shover, author of Trading Options in Turbulent Markets (Bloomberg Financial) says: “Gold is the end driver of global liquidity” and he is right. Industry consolidation and supply potential in western China provides a lot of expansion opportunities. In addition, bear in mind that China’s jewelry consumption per capita is less than 10% of the US. Everyone should have some exposure to it. I recommend the ETF (GLD).
America’s Family Financial Expert (R)