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The Secret to Investing in China |
All Eyes Should Be on Texas
The big gold news yesterday was India’s $6.7
billion purchase from the IMF. But it’s a much smaller number – $250
million – that’s making waves.
India’s gold purchase was no big deal. We’ve
known for a while that central banks are buying more gold than usual.
But what a pension fund from Texas is doing
with $250 million of its money is new. The Teacher Retirement System of
Texas decided to create its own gold fund. And it’s stocking that fund
with precious metals, mining stocks, and exchange-traded funds (ETFs).
Teacher Retirement’s management simply wanted
some protection for its $95 billion in assets. They realized that last
year’s near-collapse of the financial system could have put the fund
into bankruptcy. (It didn’t only because the government intervened.)
Back to the Future
Gold and other precious metals used to be a
standard part of every investment portfolio. IDE’s Rusty McDougal
reminds us that a mere 25 or 30 years ago, professionals recommended
that every investor should have 5-15% of their money in precious metals.
When the dollar was taken off the gold
standard, gold lost its popularity. Now funds and individuals are
beginning to rediscover gold.
Shayne McGuire of the Teachers Retirement
System says, “I think the largest institutions like our own are
realizing that we barely own any. The same thing applies to most of the
pension funds which manage trillions of dollars in world wealth.”
As pension funds increase their gold holdings,
they will push prices higher.
Gold’s Comeback Is Just Beginning
Gold’s comeback is just beginning. Banks,
funds, insurance companies, governments, and individuals all over the
world hold $200 trillion worth of financial assets. Less than
half-a-percent of that is in gold. For investors to increase that to
just 1%, they would have to buy $800 billion worth more.
Rusty says, “Gold is still a vastly underused
investment with a long way to go.”
Three Steps and You’re Golden
Guess what? You need financial insurance as
much as the pension funds do. And you can get it through gold just like
they’re doing. It’s not hard to create your own gold fund. Here’s how to
get started ...
1. Set aside 15% of your net worth for your
gold fund, and put 10% in physical gold to hold long term. This is not
an investment. It is the bedrock of your savings.
2. Put another 4% in global companies that
mine for gold, as well as the ETFs that track gold or gold mining
companies.
3. Put your final 1% into small
gold-exploration companies.
Why only 1% into the small exploration
companies? This is the most speculative part of your gold fund. You can
make a great deal of money with these companies, but it’s tough to
single out the ones that will be successful at such an early stage. To
increase your odds, follow IDE’s Rusty McDougal’s suggestions in his
Resource Windfall Speculator. So far this year, Rusty has made
recommendations good for gains of 224%. .. 258% ... 123% ... 142% ...
and 113%.
In addition to what you get from Rusty, you
can follow Andrew Gordon’s gold-related ETF recommendations and the
precious-metals-related options recommendations that Ted Peroulakis
gives in his
Options Power Trader.
China’s Ghost Malls
Around 500 new malls have been built in China
over the last five years. You’d think with a population of 1.3 billion
these malls would be teeming with people. Think again.
Many are still waiting for the crowds of
shoppers to arrive.
For example, the New South China Mall opened
in 2005 and is 99% empty. Fewer than a dozen stores are open in its 9.6
million square feet of floor space.
The U.S. isn’t the only country where
questionable lending and borrowing has led to disaster...which is all
the more reason to be careful when investing in China. But one fund has
come up with a stunningly successful formula...
The Secret Behind the World’s Most Successful China Fund
The most successful China fund in the world
has beaten 99% of its peers over the past five years. Its strategy is
not investing in Chinese companies. Whoa! Say again?
Only half the fund is invested in Chinese
stocks. The other half is invested in multinational companies that get
at least a third of their profits from selling to China. This has
allowed the fund to benefit from the Chinese boom while minimizing the
country risk. You can employ a similar strategy.
By the way, one of the fund’s longest-held
stocks is also Andrew Gordon’s next recommendation for his INCOME
portfolio. If you have an interest in diversifying overseas with less
risk you’ll soon be able to check out Andrew’s Income picks in
Sound Profits. It will debut in December.
Invest Safely,
Bob Irish
Investment Director
Investor's Daily Edge
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