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

Phoenix Capital Research's picture




 

 

During the 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)

I do not recommend owning a paper gold-based ETF because frankly the custodial risk is high (that is, there’s no telling if the Gold is even there or who would get it if the ETF is liquidated).

In comparison, physical bullion, stored outside a bank, is literally money in hand. You know where it is and you can find out what it’s worth. Compare that to a Gold ETF in which you’re hoping that the bank actually has the Gold and that it could actually send it to you if you requested (fat chance).

In terms of actual gold coins, there are three coins that comprise the bulk of the bullion market. They are Kruggerands, Canadian Maple Leafs, and American Gold Eagles. I’ve been told to avoid Maple Leafs by both a trader and a bullion dealer as they can easily be scratched which damages the gold and reduces the coin’s value.

In terms of silver, the easiest way to get it is via pre-1965 coins (often termed “junk” silver). You can also get silver one-ounce rounds (coin-like medallions) and 10-ounce bars. Or you can buy Silver Eagles coins.

I cannot tell you which dealer to go with, but look for someone who’s been dealing for years (not a newbie).  You should always ask for references from the dealer (former clients you can talk to about their purchases/ experiences).

Some warning signs to avoid are dealers who try to store your bullion. Never, I repeat, never store your bullion with someone else. Always store it yourself. Also, be sure to talk to the dealer for some time and ask him or her numerous questions about the industry, the coins, etc. (feel free to test him or her on the information I’ve provided you with e.g. the three most liquid Gold coins, etc.). If they can answer everything you ask in a knowledgeable fashion, their references check out, and you verify everything they say with a 3rd party, you should be OK.

In terms of other natural resources, the best assets to own are the actual resources themselves. However, not everyone can go out and buy timberland or a lead mine. So this means looking at various commodity and natural resource ETFs.

As far as stocks go, I suggest looking at large cap blue chips stocks that are able to pass on rising costs to consumers (at least in part). I’m talking about well-defined brands that offer goods and services which consumers are willing to pay more for as prices rise due to increase operational costs and commodity prices.

This inevitably leads to defensive non-cyclical industries: tobacco, beverages, medicine, energy, etc. In the large-cap space, the following are worth consideration.

Company

Symbol

Industry

Price to Cash Flow

Dividend Yield

Kraft Foods

KRFT

Food

10

N/A

Nestle

NSRGY

Food

15

2.6%

Coke

KO

Beverage

17

2.6%

McDonalds

MCD

Fast Food

13

2.9%

Exxon Mobil

XOM

Oil

8

2.2%

Clorox

CLX

Cleaning Supplies

16

3.2%

Colgate-Palmolive

CL

Oral Health

18

2.2%

Smaller companies I would consider if you need to remain long in the stock market are:

Company

Symbol

Industry

Price to Cash Flow

Dividend Yield

Smith and Wesson

SWHC

Guns

10

N/A

Sturm, Ruger & Company

RGR

Guns

14

2.3%

WD 40

WDFC

Lubricant

22

2.2%

Hormel

HRL

Spam

17

1.9%

 

I want to stress that even though these companies all have considerable pricing power, during an inflationary collapse all companies will be hit as costs rise. This is why stocks are listed as the last inflation hedges from our list at the beginning of this issue: they do not offer the same protection against inflation as bullion, and natural resources assets/ companies do.

I am not recommending any of these companies here. But if you need to have exposure to stocks to the long side, these are some of the companies I would consider. As always be sure to do your own diligence before investing in anything.

For more insights as well as a FREE Special Report outlining how inflation will tear through the financial system... visit us at:

http://gainspainscapital.com/gpc-inflation/

Best Regards

Graham Summers

 

 

 

 

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Tue, 12/04/2012 - 18:10 | 3033680 gaoptimize
gaoptimize's picture

I would put farmland over timber.  The recession will bring with it a housing bust, and with it, lower demand for wood.  And with a lower demand for wood, I'd short Pfizer while I was at it.

Tue, 12/04/2012 - 17:59 | 3033658 HomerToeclipper
HomerToeclipper's picture

Is it fair to say under the "Natural Resources" category, that OIL is a given to hold?

Tue, 12/04/2012 - 17:50 | 3033632 BlackVoid
BlackVoid's picture

The first post by G. Summers that contains information.

Thanks.

Tue, 12/04/2012 - 17:46 | 3033617 Dan Conway
Dan Conway's picture

I will gladly buy your scratched maple leafs at a nice discount! 

Tue, 12/04/2012 - 17:44 | 3033614 shovelhead
shovelhead's picture

Clorox and Coke are good.

Helps to dissolve all those EBT-less bodies that will stack up.

Tue, 12/04/2012 - 17:15 | 3033545 WhiteNight123129
WhiteNight123129's picture

TOBACCO SHARES IS A NOTABLE MISS IN YOUR ARTICLE.

Tue, 12/04/2012 - 16:43 | 3033460 GubbermintWorker
GubbermintWorker's picture

DAMN!  And here I bought any and all kind of gold coins with the prerequisite of having the best price under spot! Maple Leafs, Eagles, Phils, and Mexican Libertads.....all good to me!

Tue, 12/04/2012 - 16:43 | 3033456 SheepDog-One
SheepDog-One's picture

'Peacetime'? WTF are you on the glass pipe?

Tue, 12/04/2012 - 15:51 | 3033314 TAfool
TAfool's picture

"...I’ve been told to avoid Maple Leafs by both a trader and a bullion dealer as they can easily be scratched which damages the gold and reduces the coin’s value..."

You're (note the proper use of the contraction of "you" and "are", as opposed to the possessive "your") kidding, right? The idea behind gold investing is for the intrinsic value (bullion price), not numismatic value (collector added value). If fiat money goes bust it won't matter what your coin is, only that it is gold (or other pm's) and of good quality. Stackers buy as close to spot as possible, only collectors pay a premium. In times of severe economic stress all of the premium will be removed and intrinsic value is what will rule.

In simple terms; that scratched up and dented beat to shit Canadian Maple Leaf will spend exactly the same as the pristine Krugerrand. Do you get to buy more with a shiny U.S. quarter than you do a scratched and dented one? I bet you get the same for either one.

Buying a numismatic coin exposes you to double the risk. Not only intrinsic decline but also numismatic decline. Limit the risk, limit the loss.

Tue, 12/04/2012 - 16:12 | 3033132 LadyEconomist
LadyEconomist's picture

I don't like talking about gold purchase any more. I'm affraid it grew to the next bubble already.

I was wondering if purchasing a land is a good investment?

Also, if we are about to experience the oil and gas boom why not to invest in companies involved with oil and gas or involved in infostructure of oil and gas?

My other idea is to borrow a lot of money, long term, fixed rate.

Tue, 12/04/2012 - 17:39 | 3033604 THECOMINGDEPRESSION
THECOMINGDEPRESSION's picture

LADYEconomist YOU'RE NOT an economist, you're a debtor thats going down with the rest of the lemmings..

Tue, 12/04/2012 - 17:47 | 3033624 LadyEconomist
LadyEconomist's picture

Why is that? Could you explan? Are you after my sentence that we should borrow money, long term, fixed interest rate?

If I'm anticipating inflation it makes sense. You would owe less overtime because dollar is weaker and your interest rate doesn't adjust for inflation.

Tue, 12/04/2012 - 19:09 | 3033793 kennyvii
kennyvii's picture

You and I are on the same page in this.  I've never heard a satisfactory arguement to the contrary;  long term fixed rate debt (if you can still find it) ought to be a good idea.

Tue, 12/04/2012 - 14:51 | 3033131 Oquities
Oquities's picture

"at no point in history has the US had this much debt during peacetime"

we bomb, infiltrate, occupy, and invade dozens of countries.  this is NOT peacetime.

Tue, 12/04/2012 - 14:44 | 3033105 Alcoholic Nativ...
Alcoholic Native American's picture

Most socialist president ever. Redistribution of wealth out the ass!

Tue, 12/04/2012 - 14:58 | 3033149 paterphysi
paterphysi's picture

hahahahahahahahahaha!.......but, don't you see...hahahahahaha....wait, okay, I am settled down now from laughing at your comment. Most socialist president ever? If giving taxpayer money to the wealthy is socialism, then yeah he is a socialist -- in Bizarro-land. It is oligarchy, or better said as a plutocracy. But socalist? hahahahahahaha.

Either you are joking or you really believe in the two party fiction/fixation we as a nation are force fed.

Tue, 12/04/2012 - 16:54 | 3033489 Translator
Translator's picture

Dear lying idiot, Please explain how Obama giving  every welfare tick and leech in the country a $35,000 raise is not socialism?

Tue, 12/04/2012 - 14:33 | 3033067 the grateful un...
the grateful unemployed's picture

the one thing you can count on is policies where Obama moves to the middle. Before the election: "Israel has a right to exist". After the election, " Administration slams Israel hard on settlements.." One good rule of thumb is that the second term encumbent takes the losing candidates policy suggestions (and this goes back to Barry Goldwater in 1964, who promised to escalate the war in Vietnam in sometimes dramatic fashion, defoliating, carpet bombimg. Johnson slammed him as a radical and then adopted all his policies..)

Specifically Obama held out on the Candian Oil Shale Project, and Natgas, (because of fracking concerns, to throw a bone to environmentally tuned in college students. Pull that bone back, new drilling, new pipeline, more Natgas. He was part of Drill Baby Drill, BEFORE the BP spill and had to backpedal a whole lot. Now its forward on energy self reliance, less on Cafe standards, etc. Conclusion: gas prices go lower.

Obamacare is on the table to get us over the Fiscal Cliff. Let the states take care of it, they know how to collect cash for services (Medicaid in California takes all your assets, thank you), and why not cave, most of the GOP states are poor. Conclusion: zAfter we drive over the Fiscal Cliff, Medicare takes a hit, the poor have to go to their state programs, and the rich (who use Medicare) have to pony up more. Should be good for the HC industry insurerers who find out they can keep raising rates on boomers turning 65, who find their supplemental policy cost as much as their regular policy. But has Obama ever done anything against the HC insurance industry?

DOD spends more on services and buys less hardware. Sell your stock in weapons makers, and buy stock in anti-cyber hacking data mining, and old fashioned security. Its a lot easier to get that kind of spending through. Politicians can make a lot of noise about this bomber or that ship, but these security services are hard to vote against..

and along the line of stupid Maginot Line ideas, more money will be spent on the trillion dollar border fence with Mexico, although the horse is out of the barn, this is one thing the congressional GOP will get behind. Yes on the immigration policy, with this border fence and more security as a trade off. Buy electronic security. they'll probably sell a lot of it to the Israeli's after they force them to open the border with Gaza, and after Egypts arab spring turns to winter, and Syria disintegrates..

Tue, 12/04/2012 - 14:31 | 3033058 beastie
beastie's picture

Graham,

I no longer even bother reading what you write in your posts. I do, however, read the comments posted on your articles for comic relief. Assuming that you are not complete and utter moron you must realize that at some point even negative publicity works against you. Carry on.

Tue, 12/04/2012 - 16:56 | 3033492 Translator
Translator's picture

Translation:

 

 

I am an idiot who does not read your articles but I know they are stupid.

 

 

 

What a dildo

Tue, 12/04/2012 - 17:18 | 3033551 willwork4food
willwork4food's picture

Did someone forget their meds this morning?

Tue, 12/04/2012 - 14:29 | 3033048 SheepDog-One
SheepDog-One's picture

So then ignore all this and go long some good rifles, ammo, and concertina wire.

WD-40? Worst lube ever for a gun. Spam? Too heavy.

Tue, 12/04/2012 - 14:20 | 3033010 digitlman
digitlman's picture

Hey...this post isn't about the EU or Greece.

 

WTF?

LOL

Tue, 12/04/2012 - 14:20 | 3033007 otto skorzeny
otto skorzeny's picture

I agree with timber- it will be used in plywood for boarding up abandoned homes and as police barricades for riots. I think glass producers will do well  also as containers for molotov cocktails will be necessary.

Tue, 12/04/2012 - 14:14 | 3032990 Watts_D_Matter
Watts_D_Matter's picture

For my defensive positions I am long ......................lead....

Tue, 12/04/2012 - 14:21 | 3033016 otto skorzeny
otto skorzeny's picture

are you more of a 5.45 or 7.62 kind of guy? I think that has replaced Chevy vs Ford in the American male lexicon.

Tue, 12/04/2012 - 15:54 | 3033325 Watts_D_Matter
Watts_D_Matter's picture

I like my 45 Colt rounds...

Tue, 12/04/2012 - 15:01 | 3033157 MachoMan
MachoMan's picture

for american's I'd say the choice is between 5.56x45 (.223) and 7.62x51 (.308)...  with the latter having the distinct advantage for most wet work.  Although, I do enjoy being able to run steel cased russian surplus ammo through a commie gun every once and a while...

Tue, 12/04/2012 - 15:15 | 3033198 otto skorzeny
otto skorzeny's picture

you're right-5.56-brain locked up-I'm a little dizzy from seeing gold and silver get hammered. I prefer AK because it eats all of the garbage I feed it w/o a hiccup

Tue, 12/04/2012 - 14:03 | 3032942 petolo
petolo's picture

Graham knows about as much about gold as kids eating foil wrapped chocolate coins. Avoid the ones from Canada; they can be easily scratched.

Tue, 12/04/2012 - 16:17 | 3033369 Fake Jim Quinn
Fake Jim Quinn's picture

On that point he is correct. Canada is even changing the packaging to allow inspection w/o coin damage. I might knock Graham a lot but when he's correct, have to be fair

http://www.cmi-gold-silver.com/article/maple-leafs-coins-new-packaging/

http://www.youtube.com/watch?v=pESNqX67aIU

Tue, 12/04/2012 - 20:19 | 3033902 DosZap
DosZap's picture

The problem arises from the coins’ really sharp milled (reeded) edges. When the coins are reinserted in their tubes, the milled edges often scratch the fields.

Mapes are more delicate due to 24k status,BUT they are easily inserted and not damaged if stacked properly out of the tubes, and the slide the tube OVER all the coins at once.( As far as loss of value if scratched,your talking maybe a $10-15.00 hit, for non prefect coin.)

Scratched doesn't decrease the golds value,nor purtity.24k,is 24k.

As far as the Krugs having cheapest premiums and Mapes,Roos, etc, not true either.(may be location?).

Krugs have higher buy prices and higher resale back to dealers(due to supply demand,most recognized gold coin on the planet) than Mapes,or any 24k coins except the Pandas(that has been my experience,and MOST of the world do not consider any jewelry less than 18k worthwhile investments.(and would not be caught dead wearing it)14k so popular here, is bad news for them.

Our Eagles ,Krugs,50 Peso(re-pros) are 90%-to 91.6xx% Au,not the coins easterners want, the more pure the easier to sell.

 

For my $$$ will take the 24k Mapes/Aussie coins over an Eagle any day.Love the design, but not the insane premium difference ,$75.00-$80.00 v.s. $35-$45.

Tue, 12/04/2012 - 18:13 | 3033684 lasvegaspersona
lasvegaspersona's picture

Unless you plan to jingle the coins as you walk around then 24 vs 22 carat does not make a difference. If one is suggesting bullion then the numismatic value is of little importance. Gold at 100% is soft but not that soft. For some reasons (such as the taxes in Canada) then 24 carat is preferred.

Tue, 12/04/2012 - 13:38 | 3032840 Metalredneck
Metalredneck's picture

Is this guy a Nigerian prince? 

He never quits with the same ol' same ol'...

Tue, 12/04/2012 - 13:00 | 3032720 DUNTHAT
DUNTHAT's picture

 

Its pretty clear that we are entering a recession without the added problems of the "cliff".

To be long wastes time, and fails to generate any returns.

Based on the ISM charts and the Chicago Fed Activity index, you should be very defensive.  See below.

https://skydrive.live.com/redir?resid=28D5B46EE3D15AE3!327&authkey=!AC7uPTlVNGCiM8k

Do NOT follow this link or you will be banned from the site!