I was 8 when my father taught me about mutual funds while sitting at our kitchen table one evening. Of course, this followed a steady, spoon-fed diet of stories about Wall Street and the workings of the stock market since my birth.
I was in my teens when I got my first lessons on how the futures market worked, and then I returned the favor after college when I taught him about options on stocks.
To this day, he still prefers playing technical trends on commodities and I’m an options kind of girl, but we have a mutual appreciation of our different worlds. Recently, we’ve moved our talks to collectibles as investments but that’s a chat for another day.
After a few decades of late-night conversations over a variety of kitchen tables, there is one lesson that has rung true during all that time: There are always investments to be had no matter what the market conditions are.
The future of the American market is starting to look bleak with our government’s growing debt and the Fed’s promise of higher interest rates, but there are some interesting investment opportunities that stand to make significant gains even as stocks pull back.
The Future of American Investments
As I continue in my series (catch up with Tuesday’s article and Wednesday’s article), I decided to reach out to some members of our Council of Experts for their thoughts on where they believe the market is headed over the next 12 months.
Knut Andersen is the General Manager of Swissmetal Inc, directing an experienced team of rare and strategic metal account managers who provide personalized access to rare industrial and precious metals to individuals and institutions worldwide.
Barry Potekin is the Vice President of the Rutsen Meier Belmont (RMB) Group Managed Accounts Relations, and has been involved in a wide range of commodity research and trading activities since 1985.
Juan Federico Fischer is the managing partner of Fischer & Schickendantz, one of Uruguay’s leading law firms. He manages the firm’s foreign investment consulting unit, advising multinationals and individual investors in foreign direct investments in real-estate developments, acquisitions of local companies, agricultural enterprises and privatizations.
Jocelynn: What is the biggest threat to the U.S. investor in the near future (next 12 months)?
Knut: In my opinion, it’s keeping all savings in and being overly reliant on volatile capital markets. I’m not a financial analyst, but I see an impending correction of capital markets because of excessively high values, and other factors putting investors’ asset protection at risk. Since the 2008 crisis, the U.S. and the world have been in a false recovery. Sure, the stock market has reached incredible highs, but no one has fixed any of the fundamental problems causing the crash.
U.S. debt has skyrocketed, putting increased pressure on the dollar. The unemployment rate hasn’t improved, more people have just given up looking for a job. And inflation is creeping along at close to 10%, according to 1980s indexing.
Most investors are highly invested in capital markets with stocks, bonds and mutual funds. As we’ve learned in the past, when capital markets fail, they all collapse quickly. Since markets are overvalued, a correction is due soon.
Barry: It depends on what you want to focus on: known threats or unknown threats. Stocks and bonds survived the Greek crisis and a meltdown in Chinese stocks — two events that many predicted would cause a big sell-off. Janet Yellen has been threatening to raise interest rates for most of 2015. Her failure to act has created a “Boy Who Cried Wolf” scenario in which the market begins ignoring warnings of higher rates.
I think the biggest known threat right now is an actual rate increase. Artificially low rates have powered bull markets in both stocks and bonds. Take this fuel away, and both of these markets could fall farther and faster than most expect.
However, the biggest threat to investors could be something not even on the radar screen yet — a “black swan.” Something like a cyber-attack, for example. Black swans, by definition, are not predictable. That makes them extremely disruptive.
Juan: One of the biggest threats is being too invested in a stock market that could be overvalued, which could see a steep correction.
Escape Wall Street Now
While our experts are in agreement that the future for the stock market looks bleak over the next 12 months, there are several opportunities available that would allow you to not only protect your wealth but continue to grow it.
Jocelynn: What is the biggest opportunity you see over the next 12 months? What should investors do to protect their wealth?
Knut: Move away from trusting only stocks, bonds and other paper investments for their entire portfolio and asset protection plan. By moving part of the investor’s portfolios into solid, in-demand assets, such as rare strategic metals, they are diversifying across 95% of industries in a real product whose price is based on real industrial supply and demand.
Many strategic metals are on the precipice of major shortages, the likes of which, in the past, have multiplied values up to five times in 18 months or less.
Rhenium and hafnium especially are two metals where the current supply won’t come close to covering existing, never mind future, demand.
Because such a minute quantity of these materials are used in a per unit basis, the manufacturers who need them will pay double, triple, or even more the current rate without affecting their bottom line. The alternative is going out of business.
Strategic metals have always been a long-term protection play. But because of the critical shortages we see on the horizon, I expect large profits over the next 12 to 18 months.
Barry: Diversify. Include in their portfolios investments that can zig when stocks and bonds zag. That’s why I travel the world talking to investors about managed futures. They have a history of performing well in times of turmoil.
I like commodity-based managed futures programs a lot right now. I see commodities as the biggest opportunity because they are cheap and hated right now. Big weather events are increasing in number and intensity. Commodities are very weather-sensitive. Sugar, coffee and cotton tend to do very well in El Niño years. So far, this is one of the strongest El Niño years on record.
Juan: One of the key things an investor should do is diversify into assets outside the U.S., while at the same time choosing options with solid underlying fundamentals. When investing in foreign markets, an investor should look at those that have a track record for stability, predictability and openness to foreign investors. When looking at asset classes, an investor should look at those that not only have a track record of outperforming others, but also those that look promising in the medium and long term.
In that respect, investing in agricultural land in Uruguay is one of the best long-term investments you can make. Uruguay is unparalleled in openness to foreign investors. It tops the rankings in Latin America for rule of law, lack of corruption and investor friendliness. It has some of the best farmland in the world, non-degraded soil and good infrastructure, strategically positioning the country to meet the growing need for food in Asia and other parts of the world. And it is not overpriced.
Investments off the Beaten Path
The opportunities that Knut, Barry and Juan speak of are just the tip of the proverbial iceberg when it comes to finding investment and asset protection options that are off the beaten path.
As the U.S. stock market crumbles in the coming months, investors will need more than just a safe haven for their funds. They will need that next big opportunity.
That’s why Knut, Barry, and Juan — along with many other experts in offshore investing and quiet wealth — are joining us at the Total Wealth Symposium in The Bahamas this October. You will be able to hear where they see the next great investments for growth and learn how to best take advantage of them.
Also, for the first time ever at the Total Wealth Symposium, we are offering a special extra day of presentations for our Uruguay experts. Every year we have a special conference in Uruguay, providing insight on investing, second residence and passports, but seating is extremely limited and the conference sells out fast. If you haven’t been able to join us in Uruguay, this extra day at the Total Wealth Symposium will be your chance to speak to our Uruguayan experts.
New investments are out there. Let us show you where you need to look next.
Sr. Managing Editor, Sovereign Investor Daily