Wednesday, December 5, 2012

The Investment Classes That Will Most Benefit From Obama’s Second Term

The Investment Classes That Will Most Benefit From Obama’s Second Term
During its first term, the Obama Administration thus far has proven itself in favor of increased Government control and Central Planning. That is, the general trend throughout the last four years has been towards greater nationalization of industries (first finance, then automakers and now healthcare and insurance), as well as greater reliance on our Central Bank to maintain our finances.

Now that Obama’s won a second term, there is no indication that this trend will end. We must recall that regardless of what is said, it was Obama who re-appointed Ben Bernanke as Fed Chairman. And it was under Obama’s watch that QE lite, QE 2, Operation Twist 2, and now QE 3 were launched. It was also under Obama’s watch that the US reached a Debt to GDP ratio of over 100%.

Indeed, at no point in history has the US had this much debt during peacetime. And the fact that we’re overspending by this amount at the exact time that other countries are showing signs of shunning US Treasuries is a formula for disaster.

With that in mind, it is highly likely that the US will enter at the very minimum a debt crisis and quite possibly a currency crisis during Obama’s second term. In preparation for this, investors will want to focus on the following investment themes:

1)   Inflation hedges based on continued spending and money printing.

2)   Gold and Silver as an alternate currency based on the US Dollar falling further.

3)   Productive assets (foreign real estate, apartments in specific markets, businesses, essentially anything that produces cash).

4)   Preparing for an eventual US Debt Default.

Regarding #1, there are several areas to consider. They are:

1)   Precious metals (bullion)

2)   Natural resources, particularly timber

3)   (last and least) Blue chip businesses or companies with pricing power that can maintain profits during periods of inflation

As far as precious metals go, you need to:

1)   Own Bullion

2)   Store it yourself (not in a bank)