Since financial markets bottomed out during the Spring of 2009,
investors have become accustomed to a smoother ride in asset
Barring a mid-2010 hiccup, a look at the charts of the NASDAQ
Composite index and the Dow Jones Industrial Average shows a
relatively clean upward trend. Commodity prices have also tracked
the markets up.
On Friday, however, the markets lost their nerve, and the NASDAQ
gave up its gains for the year while the DJIA slipped below the
12,000 point level. Silver futures (SLV) collapsed in May, which
led to a critical loss of confidence in other commodity assets like
), and the news that China is
relying less on exports
may unsettle investors who view the economic titan's growth as
vital to the health of the global economy.
are faltering, commodity prices are uneasy and emerging markets
(VWO) may take a breather, where does the wary investor turn? The
obvious haven has always been Treasury notes, but no less an expert
on bonds than PIMCO's Bill Gross has
that he thinks they are a losing bet in the long term, though he
has tiptoed back towards the assets a bit. After all, the debt
can't have US bondholders feeling very secure. Making a deal
between Democrats and Republicans looks difficult, and separating
real intention from political theater is getting harder.
And those looking at the shocking numbers atop the gas pump and
seeing a potential bull market in oil were disappointed by Saudi
to cut some times with OPEC and go ahead with boosting production
to keep the cost of petroleum stable.
No obvious safe harbors offer shelter from these economic
crosswinds. Emerging markets like Brazil and South Africa look
fundamentally healthier than the big economies of the euro-zone or
the U.S., but they have their own political liabilities and rely
too heavily on commodity exports. Still, they seem more secure and
less burdened with debt and falling credit ratings.
Some investments in foreign countries have done well on the
strength of their currencies - the Australian dollar, Swiss franc
and Brazilian real have all appreciated against the greenback over
the past year, boosting foreign investors' returns from those
nations. Australia and Brazil look set to continue supplying China
with vital raw materials like oil, soybeans and coal, though a
shock to the Chinese economy,
in the form of an imploding housing bubble
, could undercut that strength. Switzerland's currency has gained
as it manages to avoid the troubles currently afflicting the
European Union's common currency, a factor which also benefited the
Norwegian krone. Of course, the krone also benefits from Norway's
supply of oil.
There are no sure bets, but investments in nations with strong,
stable currencies and a plentiful supply of vital raw materials
might be the best long-term bets right now.
Disclosure: the author is long BRF, SLV and EWS.