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Weiss: Energy and Resources

03/25/2005 12:00 am EST


Martin Weiss

Chairman, Weiss Research, Inc.

"A worldwide boom in oil, steel, coal, and other commodities is sweeping into Wall Street and lighting a fire under stocks that are directly or indirectly related to commodities," says Martin Weiss, editor of Safe Money Report. Here, he highlights the best ways to play that trend.

"Is this boom for real? For the energy and natural resource sectors, yes. It's powered by long-lasting, fundamental forces that show no signs of waning. But the commodities boom is a razor sharp, double-edged sword. It's potentially great for companies tied to commodities. But its side effects can cut deeply into nearly all other sectors, raising the specter of inflation and sharply rising interest rates. Except for the sectors that directly benefit from the commodities boom, any rise in stock values simply cannot be sustained.

"Investors today should be gradually expanding their holdings of energy-related companies, including our recent recommendation for Energy Select Sector SPDR (XLE ASE), an exchange traded fund whose portfolio includes some 24 oil and natural gas industry standouts. And don't forget the value of hedging against likely dangers. Gold is still the best protection against inflation. Meanwhile, we continue to hold our position in US Global Resources Fund (PSPFX) as well as USGI World Precious Minerals Fund (UNWPX), which invests mostly in companies that produce gold, platinum, and copper, as well as a small exposure to diamond, silver, and nickel miners. We also continue to hold iShares Brazil (EWZ ASE). Brazil is a key supplier of raw materials such as iron ore and oil, and it’s benefiting from the global commodities boom. In addition, to profit directly from an expected rise in gold, you should also own streetTRACKS Gold Trust (GLD NYSE), an exchange traded fund that is valued at roughly one-tenth the price of an ounce of bullion gold, less expenses, which are very reasonable."

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