...and Bearish on Bulls
12/19/2003 12:00 am EST
Martin Weiss is bearish on bonds, stocks, and the dollar. In a special issue on his forecasts for 2004, he says, "Our out-of-control budget deficit will trigger a bond crash and re-ignite inflation." But even in this negative economic environment, the editor of Safe Money Report sees select investment opportunities.
"My most important forecast is that the US Federal deficit will surpass $1 trillion in 2004, and this is going to have a major impact on the economy and the investment markets. The price of Treasury bonds will plunge by at least 20%, and their yields will surge to about 7% or more. That would wipe out the equivalent of four times the interest income for a year. Your first order of businesses is clear: dump every long-term bond you own, right now.
"If you sell your long-term bonds now, how are you going to replace that income? One option is the Rydex Juno Fund (RYJUX ). We recommend this fund for one simple reason: it is designed to appreciate in lock-step with the decline in Treasury bond prices. Looking ahead, if my forecast of a 20% decline in Treasury bond prices is correct, the share value of Rydex Juno should move up accordingly, by approximately 20%. Could you lose money? Of course. But only if interest rates decline. And with interest rates already near 45-year lows, and with Uncle Sam borrowing money like mad, I think the chances of that happening are very small.
"I also forecast that the dollar will fall another 20% or more and that the rate of inflation will double, or even triple. US Global Natural Resources (PSPFX ) aims to grow your capital and protect against inflation through investments in well-managed companies involved in natural-resource production, processing, and transportation. It diversifies globally through investments in chemicals, base and precious metals, and minerals. We also suggest a position in dollar-contra funds. Since last January, we've recommended two funds: American Century International Bond (BEGBX) and Prudent Global Income Fund (PSAFX ). Both invest in short-dated, high-quality bonds denominated in major currencies. Plus, Prudent Global Income also invests in some well-managed gold stocks. With the dollar falling, the American Century fund has risen by 14% and Prudent Global is up 11% since last January. In 2004, I anticipate results that are at least as good."