In part 1 of our commentary, we discussed the current Fundamental Gravity of our “Slowing Drag...
7 Ways to Get a Bit More Aggressive
06/21/2012 11:15 am EST
If you wait for Europe to be sorted out and growth to surge again in Asia, you will have missed the opportunity, so position yourself slowly for what's around the corner, observes Stephen Leeb of The Complete Investor.
Lately, we’ve been focusing on the best of what we consider to be low-risk/high-return stocks. These have ranged from Intel (INTC) to Eli Lilly (LLY). And here, too, we see no need to change our view. These kinds of investments should continue to be very good ones.
But now we’re ready to get a little more aggressive. We like silver, we like copper, and we like gold. And the major reason we like these commodities (as well as virtually all other commodities) is China.
China continues to do a remarkable job on almost all fronts. Yes, many financial experts and commentators continue to buy into the idea that China is reaching the end of a long period of outsized growth. But this is a very bad mistake.
As we’ve been saying for some years, China “gets it”—especially when it comes to resource scarcity and energy scarcity. If everyone else “got it” the way China does, China’s job would be much more difficult. And by “job,” we mean establishing a country that is built to thrive throughout this 21st century.
While it’s true that growth in China has slowed down, it’s also true that it will ramp up in the second half of the year, and probably continue at a fair pace (and not just by Western standards, but by Chinese standards) throughout this decade.
The beneficiaries will be the aforementioned copper and silver, gold, and virtually all commodities essential for building out an infrastructure necessary to accommodate new energies. Yes, this also includes oil—big time.
In general, we prefer to build a commodity portfolio around the ETFs that are directly linked to the commodity. For copper that means iPath Dow Jones UBS Copper Total Return Sub-Index ETN (JJC); for silver, it’s iShares Silver Trust (SLV); and for gold, it’s SPDR Gold Trust (GLD).
Still, the biggest winners in the next move up in commodities will be miners, but not the big ones. Ironically, the large miners will suffer for the very reason that there will be such an explosive bull market—namely, the rapidly escalating costs of mining ever scarcer resources.
That’s why we prefer junior miners such as NovaGold (NG), even though they can be horrifically volatile. More generally, we reiterate very strongly our recommendation of Market Vectors Junior Gold Miners ETF (GDXJ).
(One small caveat here, and it applies to gold itself rather than anything else, is that some of our indicators suggest that the period of consolidation we’ve been experiencing may have a bit more to run. But this is a quibble in the face of what we believe will be an inevitable bonanza to end all bonanzas.)
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