04/12/10 Taipei, Taiwan – A few days ago, we introduced the first-ever “Daily Reckoning Group Research Project” in which we asked you, The Daily Reckoning faithful, to submit your selections for the Trade of the Decade.
Specifically, we asked:
1) Identify just one specific asset, commodity, stock market sector, currency, mutual fund, ETF etc. to buy and hold for the next 10 years. Please provide a symbol, if possible. But please do not provide the name or symbol of an individual company. (We are seeking to identify attractive asset classes, not specific companies.)
2) Identify just one specific asset, commodity, stock market sector, currency, mutual fund, ETF etc. to sell short for the next 10 years.
Over the following days, we received an intriguing collection of ideas, both on the long side and the short side. Not surprisingly, a number of clear favorites emerged. The most favored favorite of all was the identical trade that your Daily Reckoning editors also favor: Sell Treasuries.
Coming up a close second behind selling Treasuries was the recommendation to sell the US dollar…or the euro. A large number of readers also suggested betting against the US financial sector.
On the long side, the precious metals gained more “buy” recommendations from readers than any other idea.
Typifying the hard money crowd, J. Proenca wrote:
My suggestion for the Trade of the Decade is this: Buy Silver. Sell 10-year Treasury notes. I’m a Portuguese citizen trying to prepare myself for the end of the euro. I’ve chosen the Gold Miners ETF (GDX) for that goal, which is working well so far.
Another voice from the hard-money crowd, F. Becker, wrote:
Sell US Treasury debt and buy gold. I still think “buy gold” is the Trade of the Decade because the world is being flooded with fiat paper from every nation. All of this paper money is basically worthless. Gold (and silver to a lesser extent) is the only real money. The US is bankrupt ($12 trillion + debt and $106 trillion + unfunded liabilities) and all the while adding tons more obligations. The only choice for the US is default or hyperinflation, or a combination of both… Paper currencies will eventually be worthless, leaving only gold as real money.
Sincerely, Dr. Ferdinand Becker, a faithful reader (sufferer, as you put it) of The Daily Reckoning.
Dozens of other “sufferers” offered some version of the idea that we should be selling paper assets and buying hard assets like gold or silver. Curiously, silver picked up almost twice as many recommendations as gold. Even more curiously, almost no one selected platinum or palladium. Almost no one…
Reader G. Presch wrote:
Buy: Palladium in physical form (forget the paper). Why palladium? Obvious reasons on the supply side are: limited current supply, difficult to get out of the ground at a high rate, limited in-ground reserves. On the demand side: humanity simply needs it much more than gold (at least according to today’s knowledge of limited uses for gold). In my opinion there is little reason to have palladium priced vastly lower than platinum, but both should win out over the next 10 years, with palladium having the potential to gain twice as much as platinum.
The precious metals were not the only hard assets to receive “buy” recommendations from Daily Reckoning readers. “Energy” in almost any form was also a popular long-side hedge against the demise of paper currencies.
Reader G. Corey wrote:
Sell any fiat currency. If I had to pick one, I’d say the euro. The EU has gotten itself into a pickle. It welcomed members it shouldn’t have, and it will pay the price. There is just too much variation among member states for all to live under one currency. And with the hard times ahead, people will at first flee the weaker currencies to the dollar. But even the old greenback is doomed. So I say short ’em all, but the euro especially. I think this will likely take the entire next decade to play out. And when it does, fiat currencies will be in shambles.
Buy natural gas. It’s been beaten way down but will surge back over the long haul because the world will start to transition away from oil. Coal is too dirty, and alternatives are lacking (solar, geothermal, biomass, wind, etc. are useful only within a narrow range of activities).
Reader F.M. Weld concurred:
My short is the euro currency because the Eurozone simply has a quagmire of disparate national interests, as well as immigration problems that will become intermittent conflagrations (e.g., dominant Muslim population in southwest France; parts of Scandinavia, etc.). Please recall that warfare is not an unknown item on the continent. It will be far worse than anyone now imagines, and I’ll guess that the euro is going, going or gone at the end of the decade.
My long is natural gas. There is a glut now (driving prices down) and huge reserves in the US and Canada; but within a few years we are going to crave a relatively clean energy source in politically secure areas.
Do I get my prize now, or do I have to wait until the end of the decade?
Francis, we’re afraid you’ll have to wait for your prize. An investment in natural gas may certainly excel during the coming decade. But will it perform better than an investment in Canadian farmland, as reader Brain Clark suggests? Or an investment in timber, as reader Ed Pok suggests? Or an investment in fertilizer stocks, as reader Jay Winburn suggests?
Here are a few more…
Reader W.G. Thompson wrote:
Sell Obama (The Dollar); Buy Ron Paul (The Loonie)
A reader named Bruno wrote:
Buy: S.E.T.I. (Search for Extra Terrestrial Intelligence project). Why? When the private economy (households and companies) failed and went bankrupt, the public economy (governments) came to the rescue. But who is going to come to the rescue of the public economy when it’s gonna go bankrupt (within 10 years max)? Our only hope is to be bailed out by extra-terrestrial entities. Hence the need to invest massively in developing S.E.T.I!
Sell: Everything you can (and buy gold with all the money collected). Why? In a world ravaged by economical, ecological and climate collapse, lone survivors will have to carry all their belongings, while in search of food and shelter. Hence the idea of having few, but valuable and easy to carry belongings.
Reader T. Ritchie wrote: Buy Energy, Sell the Euro
Energy consumption has never gone down for a prolonged period of time and with India and China about to transition their populations into major energy consumers we can expect about 1/3 of the world’s population to dramatically increase their energy demands over the next decade. Meanwhile, traditional energy sources are under production pressure, even at present levels of consumption (Oil and Uranium), or are caught under the anti-pollution/carbon movement (Oil and Coal). An interesting point that The Daily Reckoning has brought up is the connection between fresh water and energy. Soon energy is going to have to be used to produce fresh water. This will be just one more drain on already overtaxed energy sources.
Selling the euro seems like the most obvious choice of many possibilities. Although I agree the US dollar is in a bunch of trouble, the euro nations seem to be in a similar predicament but without the perceived reserve status the US dollar has. Plus, they have to contend with a bunch of different governments all with somewhat different agendas. It sounds like a recipe for disaster. I think the US dollar is a sell, but I think the euro is a bigger sell that will pay off faster.
And finally, reader R. Crawford wrote:
Buy: Green energy. You know, wind, solar, geothermal, biomass, algae, etc., even including some inventions not yet discovered. For example, what about electricity generated from electromagnetic energy in the void of space – including in our atmosphere. It could happen! Also include suppliers to these industries, which often are the biggest winners.
As for the best short, I have to look to the Chinese renminbi (yuan). The thinking is, as the world economy and currencies go through major swings in the near term, the Chinese will be “forced” to cut the renminbi loose from the dollar. It will soar briefly. But the net effect will be crippling to the Chinese economy, which by then will be in a bubble that even the US Treasury Department won’t be able to ignore. Net result will be a crash of the economy similar to the Japanese crash, and possibly the Western economies in the very near term. In 10 years, the renminbi should have bottomed out. The stronger Western economies will have survived and put themselves back on a road to overall economic strength and the Chinese, by comparison, will be picking up the pieces of their crash and trying to claw their way back into the world markets. Unless, of course, their central planners know a lot more than the US Fed and other Central Banks in the West, which actually isn’t all that difficult now that I think of it.
Check in tomorrow for “Part II” of The Daily Reckoning Group Research Project: Trade of the Decade.
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for The Daily Reckoning
Joel Bowman
Joel Bowman is managing editor of The Daily Reckoning. After completing his degree in media communications and journalism in his home country of Australia, Joel moved to Baltimore to join the Agora Financial team. His keen interest in travel and macroeconomics first took him to New York where he regularly reported from Wall Street, and he now writes from and lives all over the world.
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Buy: Clean Energy Sell: Treasuries
To R. Crawford: If the renminbi and the Chinese economy crash, what will the Chinese do about the debt the U S owes them? How will they use the debt to fight against the U S as their economy goes down?
One thing since early 2007 to now that I have learnt as a novice is that my focus l/term now is reduced to about 1 year, however overnight one volcano can quickly reduce this to weekly or less…cheers John
Hi Traders of the Decade
I think that Uranium, Agriculture, and Natural Gas are candidates for the “Trade of the Decade”. Well, what do you expect? I am Canadian and we have lots of everything. Oh, did I mention silver?
Uranium drives Nuclear plants, especially in France. There is a shortage building up there, since demand will only increase over the next decade. The USA may start building some nuclear plants and may be forced to salvage some from all those nuclear weapons it has. The USA never uses them anyway.
Jim Rogers says agriculture is the way to go. He should know, he lives in Singapore, doesn’t he? The view is much different from there. Canadians have lots of agriculture. We don’t grow oranges and bananas here yet, but we have most of the basic stuff covered.
Natural gas is a no brainer, there is plenty to go around. Right now natural gas storage is at a record high and the price of it is in the tank (no pun intended). Call it a supply and demand imbalance, which is only temporary. As more and more applications for natural gas are factored into the economy, demand will increase accordingly, and the price will keep pace with the rate of the hyper-inflation to come.
Ahh, silver. That’s a good one. There is at present huge demand for silver in a multitude of industries, and there is a serious shortage of it. The US Mint had to stop putting out US Silver Eagles, because they couldn’t get enough supplied. Imagine that! The Chinese press has gone into heavy promotion of silver. Yes, the Communists are encouraging all of the peasants to stock up on silver. Patriotic Chinese probably think that it’s a good idea to have some silver and gold, if they can afford it.
There is the short squeeze on JP Morgan for you. Some institutional investment concerns are trading in their ETF paper for the physical product, can you see where this is going? The CFTC has been stonewalling the silver short story for years. Well, the New York Times is on the story apparently, and the CFTC is now welcoming public input into the issue. Of course paternalism will prevail, and they will come up with some regulations in the hope that the marketplace will become honest, and it gives them something to do, in the name of protecting you.
Can you think of any reason why the Gold/Silver ratio is now 64:1, when it used to be 15:1? Is it possible that silver’s true value is being suppressed?
Say it ain’t so. Check it out here:
http://www.inflation.us
Silver did go to over $50 an ounce once when the market was easy to corner, but that was a long time ago. The true market in silver has been suppressed for a very long time, but now there is a shortage of it for industrial consumption and for savings.
If silver were fairly priced in terms of gold today, the price would be $80.00.
I was thinking about Lithium as a candidate for the long trade of the decade, and I see that there is only one producer in the USA. It’s a game changer for the battery industry. There is one company in Canada that will be producing high grade Lithium in the next year or two, and they already have a supply deal done with a major Japanese trading company. Not only that, they are fairly close to Detroit. (Are they still building cars there?)
What did you expect? I am just a dumb Canuck. Why is our Loony at par with the US Greenback?
The short of the decade? US Treasuries.
The ten year one will do.
All the Best,
Robert