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Diversification is the best protection, go for gold, silver, oil and property

By: Peter Cooper, Arabian Money

-- Posted Sunday, 4 August 2013 | | Disqus

Global stock markets look more over-extended this summer than at any time since the dot-com crash of 2000. This is either predicting a big economic recovery around the corner, or a massive mis-pricing driven by cheap money in search of yield. Critically profits are already turning lower.

Readers of ArabianMoney will know our conclusion. The momentum upwards will run out soon and all investors rushing for the exit at the same time will send stock markets into crash mode. Bonds will rally and then follow with their own crash.

Asset allocation

The time to do something about this is now, in the depths of summer when you can tip-toe out of the backdoor and nobody will notice. But what do you do with your money then?

This website can only offer broad advice. For our more detailed and specific investment recommendations then you need to sign-up to our companion newsletter (click here).

However, diversification of asset holdings is really your best policy. The newsletter is currently hot on Dubai stocks and real estate, oil-related assets, gold and especially silver. It makes sense to buy assets that are low in price Ė like gold and silver Ė rather than those on a high like stocks.

Silver is the biggest bargain this summer. Itís incredibly cheap and recent volatility will work on the upside as well as the downside. All you need is some patience and a strong stomach for the volatility of the ride.

We note that the oil price is high, indeed remarkably strong for this stage in the economic cycle. But then it was in July 2008 before the markets crashed that autumn. Itís another indicator, like the 24-times price/earnings multiple for the S&P 500 index that we are close to the top again.

DP Worldís numbers for global trade highlighted a 2.1 per cent fall in the first half, and as an index for the global economy that seems a better indicator than most (click here).

Oil prices

Nonetheless oil still looks a good long term buy for the same reasons as gold and silver. There is an inflation coming down the pike from global money printing and real assets will be your best protection.

In the late 1970s we saw a very similar economy to the one we are now facing. Then money printing was also out of control. Inflation roared despite a very poor economy with low or no growth. Stocks crashed by 50 per cent and zig-zagged nowhere for almost a decade. Oil, gold and silver were the standout winners. Property held its value against surging inflation.

Itís difficult to time this. Perhaps it is better just to gradually accumulate these assets. In the ArabianMoney investment newsletter each month we look at the cleverest ways of actually doing this. We did pick the best Dubai property opportunity of the past year correctly.

Actually it is far more important to your wealth to get into the right assets now rather than worry too much about timing. If silver goes to $100, does it matter if you bought at $25 or $20? The most important thing is to be in the right asset class at the right time, not when you bought it!


-- Posted Sunday, 4 August 2013 | Digg This Article | Source:

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About Peter Cooper:
Oxford University educated financial journalist Peter Cooper found himself made redundant by Emap plc in London in the mid-1990s and decided to rebuild his career in Dubai as launch editor of the pioneering magazine Gulf Business. He returned briefly to London in 1999 to complete his first book, a history of the Bovis construction group.

Then in 2000 he went back to Dubai to become an Internet entrepreneur, just as the dot-com market crashed. But he stumbled across the opportunity to become a partner in, which later became the Middle East's leading English language business news website.

Over the course of the next seven years he had a ringside seat as editor-in-chief writing about the remarkable transformation of Dubai into a global business and financial hub city. At the same time prospered and was sold in 2006 to Emap plc for $27 million, completing the career circle back to where it began a decade earlier.

He remains a lively commentator and columnist as a freelance journalist based in Dubai and travels extensively each summer with his wife Svetlana. His financial blog is attracting increasing attention with its focus on investment in gold and silver as a means of prospering during a time of great consumer price inflation and asset price deflation.

Order my book online from this link


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