What If

What if you woke up one morning to the news oil had surpassed $100 U.S. a barrel?

As a consumer, you’d likely be upset that it would cost so much more to fill up your vehicles. As an investor, you’d probably be kicking yourself for not owning some oil stocks. Oil is at about $70 a barrel right now… it has only $30 further to climb to make this “what if” a reality.

What if one day the value of the U.S. dollar crashed against other popular foreign currencies?

As a consumer, the cost of most items you buy would rise in price. America imports a great number of things… everything from merchandise to food. A devalued U.S. dollar would likely increase your cost of living. As an investor, a weaker U.S. dollar would make your foreign investments worth a lot more. By the way, how much do you have in foreign investments right now? With U.S. interest rates rising, and U.S. dollar falling, and with so much debt now accumulated in the U.S., isn’t a devalued U.S. dollar a likely event?

What if you woke up one morning to the news gold bullion prices had surpassed $1,000 U.S. per ounce?

As an investor, you’d likely say “thank goodness for my gold holdings” or you would say “I should have listened to Michael Lombardi back in 2001 when he started recommending gold.” If you believe in scenario two above, that the U.S. dollar will fall in value against other world currencies, then you need to believe gold will rise in value because what other form of currency will investors feel secure with but gold?

You can eliminate two of the above “what if” scenarios from your life by simply holding quality oil and gold stocks in your investment portfolio. If you are American, you can protect yourself against a devalued American dollar by having some investments in foreign denominated dollars. As an example, don’t own Exxon on the NYSE. Own Exxon’s subsidiary, Imperial Oil, on the TSX, a major Canadian currency denominated stock exchange.

Both oil and gold have been in strong bull markets this year. But bull markets don’t go straight up–plenty of price corrections happen on the way up. You should look at the sharp price corrections I’m expecting in oil and gold as opportunities to remove the “what if” scenarios from you life.