I looked at all possible investment possibilities, known to me:
Stocks:
in my opinion the upcoming weeks will be crucial, determining, if the rally will continue until 2012, where I believe we will then see a bear market the next years, reducing the S&P to below 2009 standards. Or, it will start next months. In any way, a long rally with the prospect of breaking down any time will not make me sleep well at night and even though the S&P will not go from 124 to 50% overnight, but over the next years, makes think, if there are stocks out there which are really a rock in water, moving slightly in booming and in recession times. In my opinion, not, but I am curious to hear thoughts.
Hedge Funds:
They sound a “safe” investment to me. However, I heard and read several times that they are not really safe either. Why that is I do not know. The idea of a hedge fund is to hedge risks, even in recession times.
Bonds:
In financial classes I learned having a diversified portfolio, serves to capital preservation. However, are bonds still a save investment with all the governmental debts coming finally to haunt them? With Ireland defaulting, next Greece, Italy, probably soon upcoming Spain, Germany and France already stating that they are being affected, in major cases probably even the countries overseas in the west, and Asia. If I were to pick bonds, I would pick any bonds of a country with a low debt to gdp ratio. In the 1st sense, I am looking to not loose any more money, as I had before September this year, where I had the majority of my investments in stocks; making money is the next on the horizon and another thing itself, which I do not want to be addressed.
Looking for bonds, adjusted for inflation, I also curious to hear ideas. Perhaps, those from Lichtenstein and China seem reasonable to me: http://en.wikipedia.org/wiki/List_of_sovereign_sta...
If the data is right Lichtenstein in deed has no debt at all, whereas China looking ok, being the coming economic powerhouse having only 5% debt of GDP; still, I do not trust communist statistics, where their grass is always green.
Currencies:
I live in Europe. The currency could break down, or it could not. I do not know, and we will find out. I was thinking about changing some euro into US dollars. However, the prospect of the US having immense debt of 15 billion, is not looking nice. So I looked at countries with low debt. Lichtenstein, Cayman Islands, Kuwait with about 50% debt to gdp, but the strongest currency in the world. Lichtenstein, would fall out, because it’s currency is pegged to the Swiss Franc, with Switzerland having a very high debt to dgp ratio, too. Now Cayman’s Dollar and Kuwait are next. Kuwait keeps it currency naturally high, what will happen to the currency in a global economy I don’t know. But I had a look at three graphs: EUR to USD, KYD, KWD, the last 3 all having the same trend overall the past years. So choosing a save currency is hard and I am curious about opinions.
Real estate:
Housing/real estate market crisis fresh from 2009.. How hard it will be affected in a recession I do not know. Still I would not go about to buy an apartment or land, only because a recession is on the run the next years, also considering real este is not very liquid.
Gold:
Another investment vehicle I learned in school, and I was told to be used in times of high inflation and recession. It seems to me Gold is no longer the save heaven it used to be, same with bonds overall, with countries defaulting. The point here is though, I heard several times, Gold is a bubble, overpriced, and me finally looking at the graphs and indicators, I could see where it has reason to drop 42 points (GLD) the next couple months, and even lower to the point of 4 years ago. The thing is this though, if we continue the rally, Gold might appreciate due to increased fears of a recession, or go with the flow of the S&P 500; or people could start selling Gold due to it being overpriced. If we were to begin the recession it would seem only likely that gold would increase in price, or it could decrease, too, due to being overpriced.
Options/Futures:
In my opinion options and Futures are an investment vehicle of speculation and my intention in this post is not to speculate but to invest, meaning finding things I do not have to worry about for a year or two.
Overall I think Hedge funds, and bonds seems a save bet to me. I am very curious of the comments, and opinions of other’s.
Answers & Comments
Verified answer
Stocks:
The best opportunities are now in european stocks right now, they have been hammered by politics and debt problem but they are still good companies over there and they still making money.
Hedge funds:
They are still good for diversification purposes even if in general the performance is less than 10/20 years ago. You have a lot of risk with hedge funds since they are still less regulated than mutual funds (you have more operational risk, strategies drift risk, ponzi stuff...). Even if it is more difficult to invest in hedge funds for an individual investor (not qualified), you can still do it through ETFs.
Bonds:
It is true that because of gov debts, gov bonds are less secure even triple AAA (look at the Germany and France). Furthermore the interest are very low for the moment, as soon as they rise you will loose money on your bonds portfolio.
I won't in Lichtenstein even if it has no debt, it is a very small country and even a small problem can rip out this country (look at Ireland with it's banking system)
Currency:
It is really complicated making money long term with currencies. Why there are so few currency fund worldwide? Because even professional can make money long term on Forex.
Gold
Gold is an insurance. But right now the price for insurance is way to high because of the bubble.
Option/futures:
It is mainly use for speculation but you can use them to also hedge your portfolio. You are right it is only for short term purposes.
Well Government issued T-bills and Treasury bonds are virtually risk free, there are also funds that offer the benefits of fixed income securities with diversification and a higher rate of return than government securities. Investing is for the long term, what type of investor are you? If your young it shouldn't be a problem whether the market is in a recession or not, over time your investment will grow. You just have to realize when the best time is to put your money into a fund not maximize returns. Right now the market is at 12,000 .... mabye there is an opportunity, if i were you wait until the end of this year to enter a growth fund. As of now invest into a value fund or fixed income fund.
You mean a Depression, because we are in a recession or never got out of one, well in 2008 the U.S. Gov bailed out the bad banks which got us out of a recession in 2009; but then in 2010 we went back into a bad recession and now heading towards another great Depression in 2012 or 2013. Just research what out Gov is doing, printing too, too much money or devaluing our currency, our so called president is taking too much vacations which is too weird and is like hes being congratulated for screwing the economy even more. Just think out side the box and not in and you will see how screwed up this country is and will take decades to get back in order or better. The stock market is a gamble, not an investment based on my four year experience and research. I buy physical gold and silver as insurance like health insurance, hop not to use it but have it just in case bad things happen.
Gold and silver will be a bubble in a decade but I buy for insurance purposes and not as an investment.
Since you mentioned SPDR GLD, i'll add in something I read the other day.
"I contacted them at 866-320-4053 to ask if the physical gold bars are insured but they just side stepped the question and said HSBC bank has 'some sort' of insurance on their holdings. They won't say directly that the GLD physical gold bars are insured but yet they also won't say they are not insured too.
One other question that SSgA dodged was when I asked them when they plan to readjust the GLD price to reflect the actual amount of physical gold in the HSBC vault. They sell off a portion of the physical gold to pay off expenses so as time goes on, the GLD price becomes less and less accurate in tracking the actual gold price."
These GLD ETF issues reduce its prospect as a safe investment and I'd be careful when using it as an indicator too. Gold itself works well as insurance against recession but the "bubble theory" is damaging its reputation somewhat.
To me, a safe investment is to invest in companies that make or transport products everyone uses, uses up quickly creating the need to buy more. Things like soaps (Unilever), oil (with Libya opening up, Italy's Eni may do well), natural gas and natural gas pipelines,and food.
Nothing is safe in short term, or long term for that matter if you just hold and hope for the best. The only good way to invest is to diversify into many stocks across many industries. Use technical analysis to time your entry and possible exists.
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9 Safe-Haven Investments
http://www.businessinsider.com/safe-have%E2%80%A6
Consumer staples stocks like Proctor & Gamble, Coca-Cola and Phillip Morris are typical safe-haven plays. Or you can get a consumer staples ETF like XLP.
All of these stocks hung tough as the market melted down, and have outperformed the stock market in the last year or so. That’s because even in tough times, people will keep buying food, soap and cigarettes.
Dividend stocks are another safe haven.
Other businesses with stable revenue streams also apply – Verizon (NYSE:VZ) and AT&T (NYSE:T) are sleepy telecom stocks that may not ever blow investors away with gains in share prices. But they deliver dividend yields of more than 5%.
In a choppy market, a return of 5% is mighty nice.
This website gives you other ideas for safe haven plays:
http://www.safehaven.com/
If you want to consider lower risk economies as safe havens, Germany has a strong economy based largely on manufacturing, steady growth, and a balance of payments surplus based on the success of its exporting industries.
You can buy the bonds directly through a German bank, but the minimum investment is large - about $70,000 (50,000 euros).
There is an exchange-traded note (ETN) devoted to bund (German government bond) futures, the Power Shares DB German Bund Futures ETN (NYSE: BUNL). However, that's not the same thing as buying bunds directly; you have a credit risk on its sponsor, Deutsche Bank AG (NYSE: DB), a basis risk between futures and bonds, and a U.S. government credit risk because the ETN invests in futures contracts and U.S. T-bills - getting you right back where you started in terms of credit risk.
So, on the whole, you should avoid this.
In terms of shares for an individual investor, I'd recommend the iShares MSCI Germany ETF (NYSE: EWG). You might also look at the iShares MSCI Singapore ETF (NYSE: EWS) - that's probably the safest haven of all, since the country has hardly any government bonds outstanding!
You seem fairly thorough in your analysis, but let's get down to specifics and define what it is you're trying to do. A "safe haven" essentially is reduced risk, correct? Anything you can think of to reduce risk accomplishes the same goal as looking for safe haven investments, per se.
Anything you can put a Stop Loss Order on, like a stock or ETF or even a futures contract, may be less risk than an open-ended long position in say, a low-risk mutual fund that is always "in" the market and gyrates with the ups and downs of the market.
Buying gov't bonds that have soared 30% in two months would be a lot riskier than shorting them. Obviously, buying an ETF near some support level, after a pullback, like GLD, is less risky than buying bonds that are near all-time highs.
If you can't define your risk, how do you know what it is. Who cares if it has a pretty name like "safe-haven?" Can you define your risk specifically? Shorting the market or a stock may be actual less risk than trying to go long a safe haven investment in a down market.
The trend is your friend. Denying this is risky. How will any safe haven play perform in a downturn like 2008 of 6,000 Dow points? Why call it a safe haven at all if you can lose half of your investment? Sounds like a plan to fool yourself, or attempt to ostracize yourself from reality, rather than risk.
With a Stop Loss Order in place, subtracting that from your entry price gives you an exact dollar amount of risk. You determine your risk, if you just think about it. That's why we trade trends: it's easy to define stop placement below the trend line, and when the trend is broken, we are automatically taken out with a well-defined risk. Otherwise, we just keep moving our stop up as price respects the Uptrend Line and ride the trend, often with a lower risk than "low-risk" investments. It's easier to invest smarter. More work initially to triggers (entry points), set stops and targets, but then you let the position run and let the market tell you what to do, rather than the other way around, which rarely ever works.