The last six months has wiped out 12% of the value of the S&P 500 and shaved a full 18% off the NASDAQ. During this same time period, gold has increased by 45% and silver by 63% (2/27, 2:00 am PST). Yes, those are 6-month returns, not annualized figures. In risk of being painted “alarmist,” I would like to point out that if the next six months don’t get any better, the S&P will post a 23% annual decline and the NASDAQ will drop 33%. If you include a 10% inflation factor, the average investor could stand to lose 30-40% of their net worth in just 12 months. If real estate makes up any part of their portfolio, they could lose over half of their net worth by August of 2008. Ouch!
These numbers are nothing to scoff at. The economy is extremely unfit; indeed, in many ways worse than the conditions that precluded the Great Depression. The coming economic collapse will likely bring a great deal of suffering to millions of Americans who have grown up spoiled by the benefits that come with a strong manufacturing base, easy credit and a printing press for the world’s reserve currency. Times are changing.
Despite a flurry of announced bailouts, stimulus packages and rate cuts, the markets have reacted with indifference and a shrug. We witness momentary spurts that give the talking heads something positive to cheer about and then a quick resumption of the downtrend. The dollar is the rock and the economy is the hard place, but they are going down together.
In the same twelve months that could wipe out over half of the average investor’s portfolio, an investor who has allocated his portfolio equally amongst short ETFs, gold, silver and energy companies, could potentially double his or her worth. Granted, the latter investor would also have to deal with inflation, but purchasing shares of Canadian gold, silver and energy companies reaps the added reward of currency inflation. The Gold Stock Bull Portfolio is full of exactly these types of companies and is up 20% during the first two months of 2008 alone.
If you are to weather this storm, protect your wealth and even profit during the next few years, you should consider going short the stock market and long precious metals and energy. Starting in March, I will be offering a detailed view of my portfolio and subscription to “The Road Less Traveled,” the Gold Stock Bull newsletter. You can get details and subscribe here. I will continue to publish free articles on the markets, but specific stock picks and investment strategies will be saved for subscribers.
“I shall be telling this with a sigh
Somewhere ages and ages hence:
Two roads diverged in a wood, and I–
I took the one less traveled by,
And that has made all the difference.”