Submitted by
Wall St.
Daily
as part of our
contributors program
.
"
Are you crying? Are you crying? ARE YOU CRYING? There's no
crying! THERE'S NO CRYING IN BASEBALL!" - Jimmy Dugan (Tom Hanks)
in "A League of Their Own"
And there shouldn't be any crying in investing, either.
Whether or not your candidate for President won, we have to stay
on the field and
in
the game. Otherwise, there's no way to get ahead.
With that in mind, let's take a look back at how various asset
classes and sectors performed during President Obama's first
term.
Then, I'll share what we can expect to happen during his second
term.
So let's get to it…
~ Precious Metals
How precious, indeed!
That's the first thought that comes to mind when I look at the
performance of various asset classes since Election Day 2008.
As you can see, precious metals are far and above the top
performers.
Will it continue? Absolutely, as long as the Federal Reserve
sticks to its easy money policies. And there's no indication that
Ben Bernanke's even considering checking himself into a 12-step
program for money-printing abuse.
Of course, while gold and silver continue to benefit, the U.S.
dollar's destined to keep losing ground.
Since the last Election Day, the buck has already lost 15.2%.
But the bloodletting's not about to stop.
As Michiyoshi Kato at Mizuho Corporate Bank told
Bloomberg
, "Monetary policy will remain loose under Obama… So the dollar
will be sold." Agreed!
Key Takeaway #1:
Go for gold (and silver). You'll need it as a hedge against
an ever-weakening U.S. dollar.
~ High-Yield Bonds
High-yield bonds rank as another top performer. Including
dividends, the
iShares iBoxx $ High Yield Corporate Bond Fund
(NYSE:
HYG
), the largest high-yield bond ETF, is up a staggering 77.7%.
That's better than the S&P 500.
But don't be a sucker and chase performance by scooping up
high-yield bonds.
As I warned
Dividends & Income Daily
readers last month, high-yield bonds rank as the most dangerous
income investment in the world right now. I repeat, the most
dangerous income investment in the world.
Why? Because prices rest near historic highs and yields sit near
historic lows. So there's only one outcome: Prices are headed down
in a major way. It's just a matter of when. (You can check
out my original warning for five more damning fundamentals.)
Savvy investors are already heading for the exits, too.
During the last six weeks, they've yanked over $2 billion out of
junk bond funds and
ETFs
- including $619 million in the last week - according to
Lipper.
Key Takeaway #2:
Even in this zero-interest rate world, don't go chasing yield
in high-yield bonds. Wait for a better buying opportunity to
materialize. It's coming.
~ U.S. Treasuries
While we're on the topic of bonds, how about the performance of
U.S. Treasuries? This "ultra-safe" bet netted investors a cool
48.9% over the last four years.
Sorry, but that's not likely to continue.
Much like high-yield bonds, it's just a matter of time before
long-dated U.S. Treasuries drop in price. After all, the Fed can't
suppress interest rates forever.
Key Takeaway #3:
While Treasuries might still offer safety, it doesn't come
for free. If we factor in inflation, Treasuries actually sport
negative yields.
I don't know about you, but I'm not interested in paying the
government to hold my money. For 30 years!
~ "Energy Independence"
During the campaign, both presidential candidates talked up
America's coming "energy independence."
Oil investors enjoyed a volatile, but ultimately profitable
ride. However, natural gas investors got clobbered, thanks to a
glut of new supplies.
Looking forward, though, I'm convinced that natural gas stands
to catapult from worst to first.
While we might have to endure a few more
Solyndra's
and
A123 Systems
(Nasdaq: AONE) because President Obama is enamored with renewables,
eventually he's going to realize that natural gas represents the
only feasible path to energy independence.
Key Takeaway #4:
Bet big on natural gas transforming the energy market in the
United States.
As I've told you before
, for maximum gains, I'd specifically focus on "pick and
shovel" companies in the hydraulic fracking services space.
~ Stocks
Moving on to stocks - surprise, surprise - the United States put
up impressive gains relative to international markets, emerging
markets and the highly touted BRIC countries. Consider it more
proof that robust GDP growth is
not
a prerequisite for double-digit stock market gains.
Do I expect it to continue? Absolutely. I shared 10 reasons why
last week. Here's the most compelling one - U.S. stocks are still
cheap.
The S&P 500 Index currently trades at about a 10% discount
to its five-decade mean price-to-earnings (P/E) ratio.
Relative to the rest of the world, U.S. stocks are even cheaper.
The S&P 500′s current P/E ratio of 14.4 represents a 16.5%
discount to the P/E ratio for the
MSCI All Country World Index ex US Index Fund
(Nasdaq:
ACWX
).
As
Bloomberg
notes,"The last two times U.S. equities were this inexpensive
compared with global stocks, in 2003 and 2009, gains in the S&P
500 lasted for at least three years."
Obama got four more years in the White House. And I sure
wouldn't complain about three more years of stock gains. Bring
it!
Key Takeaway #5:
The object of investing is to buy low and sell high. And the
United States still represents the best opportunity to do so in
stocks. So keep buying.
Next Thursday, I'll dig into the U.S. stock market even more,
highlighting the returns of each sector and the outlook for the
next four years. Be sure to tune in…
