Submitted by
Wall St.
Daily
as part of our
contributors program
.
Today, I'm taking my marching orders from an irate
Wall Street Daily
reader…
You'll recall in previous columns (see
here
and here) that I addressed the mounting fears over the Fiscal Cliff
- the draconian spending cuts and tax increases set to kick in on
January 1, 2013.
I pretty much told everyone to keep calm and carry on. Why?
Because the "walls of reality are closing in" on Congress, as one
Washington insider put it. And a compromise is the only option.
Otherwise, the U.S. economy crashes. Hard.
Apparently, that wasn't enough to assuage Wayne F.'s fears,
though. He informed me via email that "political information has no
value unless it's accompanied by specific investment suggestions
and the reasons behind those suggestions. Tell me to buy or sell
something - and tell me why. If you can't (or won't), then your
newsletter is of no use to me."
Yes, sir!
So today, even though consensus continues to build that a
compromise will, indeed, be reached, I'm going to provide an entire
portfolio of investments one could make to protect against the U.S.
economy plunging off the Fiscal Cliff.
Hopefully it will satisfy Wayne and any other Nervous Nellies in
the crowd…
Gold, Guns and Canned Goods
No disaster preparation portfolio would be complete without the
traditional end-of-the-world necessities. The reason each merits
attention right now couldn't be more straightforward:
-
Gold:
As I revealed last Thursday, gold and silver are the top two
performing investments since President Obama was elected in 2008
(which also coincides with the start of the Fed's aggressive
quantitative easing practices).Well, that outperformance isn't
likely to end anytime soon if we fall off the Cliff. Why? Because
the Fed will be forced to crank up its money-printing efforts to
revive the economy (again).So go ahead and throw a few bars in
your rucksack before you head for the log cabin in the
woods.
-
Guns:
Millions of Americans can't be wrong. After years of brinkmanship
and inaction, they're convinced that politicians are leading us
down a path of destruction. Thus, they've been taking up arms,
just in case. Guess what? That emotion - and the gun-buying
activity - is only going to hit fever-pitch levels if we fall off
the Fiscal Cliff. Heck, the number of background checks on people
applying to buy guns, an indicator of future sales, already
jumped 18.4% in October.And as guns fly off the shelves, so
should shares of
Sturm, Ruger & Co.
(
RGR
) and
Smith & Wesson Holding Corporation
(Nasdaq: SWHC).
-
Canned Goods:
Everybody needs to eat. No matter what's going on in Washington.
And if we're headed for a true disaster, we'll need to stockpile
non-perishable items, which makes
Campbell Soup
(
CPB
) a smart bet.It's the world's largest producer of soup. Shares
are cheap at less than 13 times forward earnings. They also sport
a modest yield of 3.3%, to boot. Other consumer staples stocks
wouldn't be a bad bet either. Like
Kimberly Clark
(
KMB
) and
Kraft Foods Group
(Nasdaq: KRFT).
Speaking of the Woods
Once we've stockpiled the necessities for our deep forest
retreat, we'd be well served to buy up some trees, too.
Seriously.
As I've shared before:
"No matter what's going on in the world or the market,
trees keep growing, silent and unattended.
"The average North American forest produces about 8% more
timber every year. And as trees get larger, they command
premium prices, too.
"It's also worth noting that not even natural disasters can
undermine timberland's value, as damaged timber can still be
sold. For example, after Mount St. Helens erupted, nearly 80%
of the scorched timber was still suitable for sale.
"So, simply put, all that's required for trees to increase
in value is the passage of time."
Timber investments also provide an extra dose of inflation
protection. During the bout of runaway inflation we experienced
from 1973 to 1981, timberland was one of the top-performing hedges,
increasing by an average of 22% per year.
The easiest way to invest in timberland via the stock market is
through the
iShares S&P Global Timber & Forestry Fund
(Nasdaq: WOOD).
Alternatively, you could consider buying individual positions in
some of the largest weightings in the ETF. Like
Plum Creek Timber
(
PCL
),
Rayonier
(
RYN
)
,
or
Weyerhaeuser
(NYSE:
WY
).
Stay tuned for tomorrow's column where I'll finish building our
Fiscal Cliff portfolio with three more critical investments.