To Leo's themes;
- Inflation/ deflation
- Alternative energy (solar, wind, nuclear)
- Chindia (China & India)
- Demographics (healthcare, biotech, etc.)
- New technologies (nanotech, etc.)
For inflation you know to buy TIPS and commodities. Deflation is trickier. Mish has made the case before for gold as a deflation play. A true and widespread deflation I would take as having a lower probability than inflation. If we really do have deflation then I would think that would be an utter sinkhole for stocks and depending on how it played out I expect to have very little US equity exposure and hopefully there would be some foreign equity markets that would be attractive.
Alternative energy seems to be a no brainer conceptually but I can see where the road to actually getting there will be very lumpy. The things the whitehouse is talking about notwithstanding the next time oil goes to $120 or some other scary number there will be an outcry for someone to do something and all of the alternative energy stocks will go up. Think about that sentence, what will happen to oil stocks of oil goes to $120? The stocks will go up. They will go up with the alternative energy names. The correlations tend to be high but the alternative energy names tend to be more volatile. It is easy to believe in alternative energy, more like root for it to become mainstream, but for now it has a high correlation to fossil fuel stocks but with more volatility.
Some readers may know I favor China over India. I get the feeling that China is more committed to improving the quality of life on the ground than India is and it seems like there are many more ways to invest in China than India. A reader left a comment about corruption in India being relatively bad and the investment restrictions in India strike me as being more onerous.
The demographics play is a big one and one I have mentioned before. To this end I own one of the medical device makers for clients (human replacement parts) and there there is an iShares ETF fro this space, not sure if there are any other device ETFs. I also think generic drugs work here as a proxy. We will collectively take more pills to stay healthier longer and the generics seem to be obvious here. While certain US sectors will become less attractive to invest in, I think healthcare will be an exception. I also think the manner in which retirement communities are evolving away from the nursing homes that most people dread will become an investable theme at some point.
New technology is tough because I think it requires individual stock exposure which many folks may not want to do. The reason I say that is that in many very narrow areas there is competition between a couple or several companies. Often one company wins at the expense of its competition (I thought this was a big problem for the Healthshares ETF that were shut down). I don't know much about nanotechnology but can every company in the PowerShares Nano ETF be a winner? Maybe a better question is can every company survive?
I might favor a couple of different themes than Leo. I think infrastructure is important along with certain commodities and certain countries. To my way of thinking these are easier to understand and so then easier to build into a portfolio.
10 comments:
Roger (and anyone else who may wish to respond). Your international theme is compelling; however, foreign stocks are generally inconsistent in their distribution payouts. Even the best tend to payout only twice a year and many payout only once. Would you share the names/symbols of any good foreign stocks or ETFs for one who is interested in income.
Thanks,
JCarr
I could care less if they only pay once a year as long as they pay. But I would like to hear about foreign equities with good yields and bright futures.
Interesting that you think you might go heavily foreign when deflation comes back. Actually, I think treasuries are the ticket when deflation comes back. After that foreign equities.
BTW, I do not think Mish will be proven right until 3 to 12 months from now so enjoy the rally or bull market or whatever while you can.
Alt energy and new technology are tough to pick. Would require a prediction of what the 'big fist' of government decides, in both the US and China.
I recall a list of "defunct US auto manufacturers": I first saw it at the Ford Museum, but there is a wikipedia list as well. It is not a short list; there were electric cars in 1894. All of those companies had investors.
www.finviz.com has a good screener.
Screen by target dividend yield / country and this generates lists of stocks meeting these parameters. These can be further reduced by incorporating parameters that you favor.
There are plenty choices that can be incorporated into thematic investing strategies ie
Energy/Oil Related: STO, SSL, WH
Infrastructure/Utilities : NGG, CIG
etc.
busy morning, go figure?
JCarr, foreign companies are lumpier payers. in addition once or twice a year they amounts vary more than US divs.
most of the big ETF providers have a foreign DVY of somesort and WT has a bunch of them. I would say to look under the hood for the characteristics you are looking for.
I don't pick stocks with dividends as the primary consideration. Usually div decisions come further down stream.
Matt I seem to recall hearing that in the 1920s there were over 500 US car makers. We have had many failures but also a lot of mergers.
Colin, thanks for the Finviz tip.
what doe WT stand for?
WT=WisdomTree
Roger,
I remember reading in seekingalplha that the market downturn from 2007 was due to the rise in fuel/oil prices. A university using a simulator model conducted the study. The findings were striking since we believe today that the market downturn was caused by the sub prime. I am trying to find the seekingalpha article, but it has been a few days.
Jeff from Milan Italy
Wow- you all must read MRegan's blog post @5:52pm over at the big picture.
http://www.ritholtz.com/blog/2009/05/the-list-what-the-business-press/#comments
Anon 5:16- thanks for the link. All I can say is that the GS S&P future shadow purchases have been running rampant on blogs for weeks now and this is why it is so dangerous to be short the market. Tough to fight the fed.
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