Back in May of 2012 Nouriel Roubini (aka Dr. Doom) predicted that slowing growth in the United States, growing debt troubles in Europe, a slowdown in China, and intensifying political gridlock with Iran would come together to create a “Perfect Storm” for the world economy. Below we outline three ETFs that could thrive as global economic growth expectations deteriorate, keeping in mind that virtually no asset class will be safe if the “Perfect Storm” actually strikes. Words: 606
So says Stoyan Bojinov (www.ETFdatabase.com) in edited excerpts from his original article*.
Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!) and www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) has edited the article below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.
Bojinov goes on to say, in part:
All of the cited factors above are, in fact, slowly coming together:
- The United States has been dealing with mixed economic reports from both the labor and housing markets.
- Lawmakers in Europe have yet to embark on a comprehensive plan to bring unity and stability to the currency bloc.
- Inflation has cooled off in China, perhaps suggesting that its streak of hot growth may have already seen its best days.
- The situation in Iran has heated up once again, leading to volatility in the crude oil market while at the same time pointing to gloomy days ahead for those following Roubini’s prediction.
Below we outline three ETFs that could thrive as global economic growth expectations deteriorate, keeping in mind that virtually no asset class will be safe if the “Perfect Storm” actually strikes.
1. Physical Precious Metal Basket Shares (GLTR)
Precious metals have demonstrated their ability to take on safe haven appeal when clouds of uncertainty gather over the market. The appeal behind investing in this corner of the commodities market is fairly straightforward; precious metals are known for preserving capital over the long-haul as well as offering a hedge against rising prices, two “risk off” characteristics that can thrive when volatility strikes on Wall Street.
GLTR is physically-backed, effectively steering clear of the nuances associated with futures-based commodity products. Each share of GLTR holds a basket of gold, silver, platinum and palladium in fixed weights: 47.6% of gold, 40.3% of silver, 7.3% of platinum and 4.8% of palladium.
2. Dynamic Food & Beverage (PBJ)
The inherently defensive nature of consumer staples makes investments in this asset class quite appealing in times of economic turbulence. As the global economic backdrop becomes gloomier, investors will likely scale back on risk before entirely pulling out of the market. One of the most common corners for those looking to weather an equity market storm is the food and beverage industry, offering up a viable defensive thanks to inelastic demand for everyday goods.
PBJ holds 30 U.S. food and beverage companies, including industry bellwethers like Yum Brands, Kraft Foods, McDonalds and Archer-Daniels Midland, in its top ten holdings. The top three allocations by sub-industry include packaged foods and meat, restaurants, and soft drinks companies.
3. ETRACS Fisher-Gartman Risk Off ETN (OFF)
This ETN makes it easy for investors and traders alike to go into defense mode by tapping into a handful of asset classes that have a tendency to appreciate in times of uncertainty through a single ticker. As the name suggest, OFF allows for investors to quickly and easily scale back on risk exposure and, as such, it makes for an appealing instrument for those looking to profit from the potential “Perfect Storm” that is brewing.
OFF holds short positions in risky assets like international stocks, energy and agriculture commodities, as well as emerging markets currencies. At the same time, this ETN also holds long positions in a basket of safe haven asset classes, including the Swiss franc, U.S. Treasuries and German government bonds. Investors should be aware of the inherent credit risk associated with this offering given its product structure.
*http://etfdb.com/2012/3-etfs-for-roubini%e2%80%99s-%e2%80%9cperfect-storm%e2%80%9d/#ixzz23IdtM7AP (To access the above article please copy the URL and paste it into your browser.)
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Editor’s Note: The above post may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.
Renewed leadership by the sectors that stand to benefit most from a stronger economy and profit growth down the road…could be one of the best indications that perhaps the worst is indeed behind us and the rally has more room to run. However, if these cyclical sectors fail to participate more fully, that would be a signal of more potential trouble ahead. [Let me explain.] Words: 840
I believe that in the autumn of 2012 we are going to see…a series of negative events – failing economies, higher unemployment, more QE, and extraordinary levels of social unrest. When QE is announced, I see a temporary rally in stocks but at some point stocks will collapse. I’m not talking about mining stocks, but common stocks outside of the mining sector.