That bodes well for domestic over foreign securities,
from stocks to bonds.
Buy government bonds
Nobody is happier to give away
taxpayer money than Congress, which has come perilously close this month to
squandering it on the Big Three automakers, the stupidest managers outside the
gold industry.
The Democrat-controlled Congress will have no inhibitions in granting relief
to states and cities, however, and you can invest in them through their bonds.
Those bonds currently offer yields that approach 10% when you add in their tax
benefits.
"We just bought some New York municipals at a 6.4% yield," marvels Lewis J.
Altfest, a financial adviser in Manhattan. These are New York City
double-A-rated bonds, which are free of federal, state and city income
taxes.
"Where does anyone come off giving you triple tax-free for a rate so much
above Treasurys?" Altfest asks. "It's not an overstatement to say it's unheard
of."
In more normal times, the bonds would yield about 15% less than Treasurys.
Since a bond's yield is the reciprocal of its price -- opposite ends of a
teeter-totter, joined to each other -- a return to normal yields would send
prices soaring, generating lush capital gains for bond owners.
Even federally linked bonds, namely mortgage-backed securities from the likes
of the Government National Mortgage Association, aka Ginnie Mae, are selling at
distressed prices, and most bonds backed by high-quality mortgages are
explicitly or implicitly guaranteed by Uncle Sam.
But don't buy Treasurys. The federal issues are way overpriced because of the
fear factor."
Time mentions specific stocks and funds for his other sector picks which
include The Green Factor and Infrastructure. He mentions the
reasons he like companies like Caterpillar (NYSE:CAT) and
Wal-Mart (NYSE:WMT).
He also has some smart ways to play the US dollar's rally, which will most
likely continue on into the first half of 2009. The dollar will most likely
struggle to maintain its supremacy in the long-term, and that is why I'm buying
funds like The Central Fund of Canada (AMEX:CEF) when the
dollar rallies higher.
I also like copper and gold companies like Freeport-McMoran
(NYSE:FCX) as well as the pure gold and silver plays like
Barrick Gold (NYSE:ABX), Goldcorp (NYSE:GG), Yamana Gold (NYSE:AUY) and
Agnico-Eagle Mines (NYSE:AEM).
But I won't buy them unless they have corrected down towards their 52-week
lows, which is likely to happen again if the dollar really takes off. I also
maintain some positions in the gold and silver ETFs (GLD and SLV) as well as a
core position in CEF in case I'm wrong and gold/silver just keeps moving upward
over the next 6 months.
