So, it has been over a month since my last post. The reason for that has been part intentional and part unintentional. Unintentionally, I have let the summer get away from me. “We are expecting our first child in September”, is probably my only legitimate excuse and I hope you can forgive me. But intentionally, I have not posted because, despite all of the noise in the markets this summer, NONE of my portfolio positions have changed. US equities still rule the asset class battle with Emerging market stocks, commodities and precious metals as also holds. Bonds, while we have seen some positive inflows into bond funds in the past month or so, are still out of favor and holding cash is just a bad idea. All technical signs point to an offensive holding pattern. We have the ball, but are playing it safe.
Here are the latest portfolio statistics. As you can see we are up nearly 9% for the year, and we are quite handily, beating the S&P and most other benchmark indexes.
| | Jan 24, 2011 | 7/22/2011 | % Change |
| My Portfolio | $99,994.75 | $108,776 | 8.78% |
| S and P 500 | 1282 | 1344 | 4.84% |
| FTSE 100 | 5943 | 5899 | -0.74% |
| Commodities Index (GSG) | 33.99 | $36.01 | 5.94% |
| 20 Year Treasury (TLT) | 92.43 | 95.66 | 3.49% |
Now, here’s the rub and the reason for my posting today. Usually, any portfolio changes are not made overnight, and usually we have plenty of fundamental AND technical warning for making appropriate portfolio modifications. However, because of the impending debt ceiling crisis is in the hands of the most closed-minded and one-sided people on the planet, all of my portfolio positions are in danger of taking a big hit… and so are yours. So, you NEED to be prepared for the Armageddon scenario of a US default or a downgrade in credit rating. Believe me, we DO NOT want this to happen and there is nothing we can do about it if it does …except move to Canada. What I can help you do, at the very least, is protect your portfolio.
· First, listen for key phrases like “The US is NOT RAISING the debt ceiling”, “Moody’s has DOWNGRADED the United States credit rating”, or “the US is defaulting on its debt.” Any of these phrases will create chaos in the financial markets and will be cause enough for you to get ultra defensive in your investment portfolio. I am not a fear monger and I hate to think of what can really happen if we do not figure out this debt problem. But if we default it could lead to the US dollar no longer being the world’s reserve currency. If that happens we could be looking a catastrophic change for the worse in our long term quality of life.
· Second, plan for an immediate liquidation of all stock market AND bond mutual funds. Just sell and sit out the turmoil.
· Third, look to increase your holdings in physical or ETF gold and silver, regardless of price.
· Fourth, look to increase your holdings in physical or ETF commodities.
Three and Four will be the ONLY asset classes that have a chance at retaining value in the months following a US credit downgrade.
Stay liquid and stay alert.
Happy Investing!
