— “Ahead of the Street” Column, by Mitchell Clark, B. Comm.
It looks to me like the Dow Jones Industrial Average is making a bit of a right shoulder in its trading action and I have to say that I’m super cautious on the outlook for stocks going forward. In fact, I would venture to say that investment risk in equities is very high right now. I’m uneasy about this market and that includes Chinese stocks as well.
As we all know, the world is awash in debt. Remember when every Western country in the world announced major stimulus spending packages to artificially boost their economies? There was a lot of public pressure for this to happen. Now the repo man is getting in his tow truck with his collection list.
If I was an investor with loads of money in my account right now, I’d buy gold bullion and precious metal producer stocks. I’d speculate in some junior mining companies and some U.S.-listed Chinese stocks. And, there are always some attractive, special situation opportunities to consider. But, I wouldn’t load up on stocks — even really conservative companies with strong track records of success. I’d be more apt to invest in real estate and farm land, even globally.
I just have this uneasy feeling about the state of things over the next few years. From my perspective, the economy was not allowed to correct itself after the financial crisis in 2008-2009. With so much debt and money creation taking place in virtually all developed economies, investment risk is growing tremendously. Never before has the New York investment community taken its trading direction from what’s happening in China, but this is the case now. While China is a force to be reckoned with going forward, it’s still very much an unschooled economy. China and India are the globe’s only two large growth engines right now and if they experience a crisis (like a real estate price correction or a war), then we are really vulnerable to another major correction in our own capital markets.
I think that investing superstar Jim Rogers is going to be proven correct this decade. He contends that Wall Street investment bankers will wish they learned how to drive tractors instead of how to financial engineer derivatives. The world is going to change a lot over the next several years and, right now, I want to be in a strong defensive position. It’s the same old story. Get out of debt as much as possible. If you want to invest, consider commodities and real estate (including farm land). Speculate selectively in China if you want the risk, but be ready to jump ship at any time.