This is a rough time for conservatives to both find sound investments and sleep soundly at night after purchasing them. The world is awash in private, corporate and sovereign debt. Liberal governance has taken over most of the globe. Global growth is abysmal. A handful of mostly SF bay area bloated priced “unicorn stocks” such as Netflix, Facebook, and Tesla have dominated market gains in the past few years. Increasingly one must think outside of the box in order to have their capital preserved.
The article you are reading is the first of a series focusing on contrarian picks which will fare well in a poor liberal-run economy as we now have globally. While I am not a licensed stockbroker I have traded stocks since I turned 18 years old in 1996 or so and I have studied the series 7 stockbrokers manual in depth. I have a political science degree from the University of California with concentration in international political economy and Constitutional law. And I have a paralegal degree with honors from DeAnza College in Cupertino.
My first pick is FXA. This fund invests in the Australian dollar. Several members of my family and I have bought into this fund. Purchasing this fund allows me to take my wealth out of investments based on US dollars, and instead shift to the more stable Australian currency.
So far this year the US dollar has been extremely strong. Yet the United States has a debt to GDP ratio of over 100 percent according to the IMF. Eventually our debt rating will most likely be downgraded. Then, the deficit and debt will be unmanageable and the dollar will crash. I am watching the bad jobs numbers reports coming in under the end of Obama’s term. It is also worth keeping an eye on the price of oil and its impact on US fracking companies, who could default on their loans, resulting in banks getting hammered afterwards (and then a possible run on the banks).
The way to play this, at least long term, is to get your money out of massive debt based instruments such as the US dollar, US bonds, and away from overpriced things like stocks (which are trading at over 18x earnings while profit margins are shrinking nationally quarter after quarter). Investing in the Australian dollar will protect you from the devastating collapse the US dollar will eventually see when our debt is downgraded.
Unlike the US, Australia has laws in place that mandate that their nation may not spend more than $300 billion in debt in a given year. This keeps their government from getting carried away with social spending . Here is a chart that shows debt spending compared to their gross national product : At 30 some-odd percent it is well below that of the US, which issues more debt every year than we produce goods.
Australia is a very fiscally conservative country, rich in natural resources, and it is a nation which is more stable socio-politically speaking than much of the rest of the world. The Aussie dollar traded at over a dollar each if you go back a few years. Currently the Aussie dollar trades at like 75 cents on the dollar. The Economist magazine (London) argued faily recently that it should be more like 89 cents on the dollar. Unlike Europe and the US, Australia does not have the social upheaval of race relations or war/refugee issues. They have also not had significant terrorism or security issues. Political conditions there are favorable to investing from my perspective.
Downside wildcards on the Aussie buck include talk of a credit rating downgrade. and the price of iron ore is said to play into the price of its dollar . It is also my understanding that oil prices play a role. and oil prices will likely decline short term due to global malaise and over-supply. Longer term oil will go up due to global over-population and also because markets in China and Africa are expanding. Also there is a lot of private household debt in Australia. But then again FXA tracks the Aussie govenment’s performance more than the public’s performance in my estimation.
It is important to remember that currencies do not double overnight the way unicorn stocks do . So there is no point in buying a small amount of FXA. You will only make real money if you risk real money. If you are playing with a mere 1k you would do better in penny stocks or in silver coins. A twenty percent upside doesn’t mean much if you invest a mere 1k. but if you invest 10k or more then a twenty percent gain would be a decent gain.
In a short-sighted attempt to stimulate their economies through ridiculously low interest-rate lending and funny-money, most of the world has taken to printing absurd amounts of money with central bank quantitative easing to the point of inevitably devaluing their currency over time. Eventually countries taking on record amounts of debt see their purchasing power decline over time as their currency value declines. And eventually their debt is downgraded by organizations such as Moody’s. When their debt is downgraded the interest rate they pay on the debt increases, and more and more money eventually goes towards servicing the debt . Finally when servicing the debt becomes impossible the IMF moves in and imposes fiscal austerity (otherwise known as welfare cuts) and starts to siphon off large national resources and properties to sell to globalist elites at reduced cost.
Long term, when measured against the US dollar, there seems to be much more upside in the Australian dollar than the US dollar because Australia offers a way out of the funny-money runaround. The Aussie dollar is something a conservative can invest in as a long term strategy and still sleep well at night.