If we see higher risk assets further over-valued, do not chase the move, but rather sell into price ...
Real Estate and Resources
03/24/2006 12:00 am EST
Martin Weiss, along with Michael Larson, new contributing editor to The Safe Money Report, see a boom in resources along with a bust in real estate. "How can you play both mega-trends?" Here, they explain how to bet on both trends via different funds.
"The housing boom of 2005 is turning into the housing bust of 2006. Millions of investors are overloaded with real estate. If you’re among them, it’s high time you start unloading, hedging, or both. Alternatively, if you have some funds set aside for aggressive investing, we think it’s a great time to shoot for major profits from the bust. Never before have we seen a sharper dichotomy: A bust unfolding in real estate.. and a boom already under way in natural resources. So how do you play both megatrends conservatively?
"The Short Real Estate ProFund (SRPIX) is designed to go up in value when real-estate related stocks go down. But it’s not designed to track the residential real estate market. Instead, it trades inversely to commercial real estate shares, using the Dow Jones US Real Estate Index as its benchmark. If you’re heavily exposed to commercial real estate, this is a solid hedge.
"PowerShares Dynamic Building & Construction Portfolio (PKB ASE) can be shorted by those who believe that real estate related issue will fall in price. Unlike the Short Real Estate ProFund, this ETF does contain some home building stocks, plus basic materials providers and construction firms. Consider targeting it for short sale if you’re heavily exposed to commercial and residential real estate.
"No matter what, always be sure to keep a big chunk of your portfolio safe, liquid, and short term.. monitor your investments at least monthly, and...make capital preservation your first priority. In today’s topsy-turvy world, we feel it’s the only way to be well prepared for the unexpected.
"The streetTRACKS Gold Trust (GLD NYSE) is a good play on natural resources: Gold corrected sharply in early February, dropping about $400 per ounce from peak to trough. But the fundamentals didn’t change one bit. Overall demand for gold hit a record $53.6 billion in 2005. India’s consumer demand jumped 17%, while China’s investment demand surged 20%. And US consumers are pouring money into gold via exchange traded funds. Fourth-quarter demand for gold bars and coins surged 72% from a year ago. We’re looking for a move to $600.
"US Global Investors World Precious Minerals Fund (UNWPX) has plenty of gold, silver, and copper miners tucked away in its portfolio. That means it’s well-positioned to make the most of the continuing bull market in metals. UNWPX gives you diversified exposure to the broad-based metals rally. The fund has gone ballistic, so if you’re already in it, hold. If not, buy at $23 or better.
"US Global’s Global Resources Fund (PSPFX) has cleared $16 for the first time in its 22-year history. It has big holdings in high-performance energy stocks like Petroleo Brasileiro, Valero Energy, and Sunoco. It is also positioned in a handful of surging coal, gold, silver, and copper stocks, precisely the sectors with some of the best performance."
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