Nov 05, 2003
"This is not just a bear market rally, but THE GREATEST SUCKER RALLY IN HISTORY." –Jeremy Grantham, in this week's Barrons
Jeremy Grantham manages $48 billion dollars. With 35 years of investing success, much of it in the stock market, his opinion is worth listening to.
In this week's Barron's, Grantham predicted that the stock market will show a negative return of –1% a year over the next seven years. He said "There are fewer places to hide than any time in my 35-year career." So what should we do? When pressed, Grantham said "the place to hide is in foreign stocks, emerging markets, and paradoxically, high-quality U.S. and, if you insist, REITs [real estate stocks]."
Sounds like the veteran has been reading our newsletter. We're already up 35% in five months on our EMERGING MARKETS fund. Our best performing REIT is up 85%. DR Horton, our homebuilder, is right at a 100% gain. And the share price of Beazer Homes just broke through $100 a share, leaving the "experts" scratching their heads.
Grantham is a smart guy. But he's missing the BIG opportunity.
Grantham didn't talk much about assets outside of the typical stocks and bonds. This was his big mistake. Please understand, STOCKS AND BONDS AREN'T YOUR ONLY CHOICE. Don't get stuck "inside the box" here. You have a world of alternatives. . .some that are so ignored, beaten up, and ridiculously cheap that people don't even consider them "investments" anymore.
The message of this table (see below) is extraordinary. . .It is the performance of various selected investment classes from 1968-1979, out of the book A Random Walk Down Wall Street. The time frame is significant... 1968 was the very end of the last great stock market bubble. . .which is in third place in the history of modern U.S. stock market bubbles, behind the bubble of 1929 and that of 2000.
Annual Gain of Various Investments 1968-1979
15.7% Rare books
12.7% Rare coins
12.5% Old masters' paintings
9.6% Single-family house
6.5% U.S. CPI (Inflation)
6.4% Foreign currencies
5.8% High-grade corporate bonds
3.1% Common stocks
I find this table incredibly interesting. . .stocks and bonds were the worst performing asset classes – they couldn't even keep up with inflation! This is twelve years we're talking about here!
I also find it interesting that gold, at the top of the list after the last great bubble, has been an outstanding performer after the recent bubble once again (after a 20 year slumber). Gold bottomed in 1999 at $251. Today, we're above $380 – an incredible move! Fortunately, True Wealth readers bought into our gold preferreds a year and a half ago, and we're up over 63%. Our gold blue chip, recommended just five months ago, is up by 46%! Rare coins, also a good performer on the list above, bottomed in November of 2000 – not too long after the peak in the Nasdaq. While the Nasdaq soared throughout the 1990s, gold coins lost 85% from their 1989 peak until their 2000 bottom. After bottoming in 2000, they're now up over 50%! We're up nicely on our recommended coins, and there is still plenty of room to run. (We're still 75% below the 1989 peak!)
Farmland, too, is increasing dramatically in price in some places like Argentina, where we have already invested, with last month's recommendation.
The point is, Grantham may be right. . .stocks may be extraordinarily expensive and may stink for the next seven years as an investment. But that does NOT mean that we can't make extremely large profits through investing... We just have to do away with the "old" thinking... that stocks and bonds are the only way to go.
Stocks and bonds are NOT the only way to go.
THE LONGER IT TAKES YOU TO BREAK OUT OF THE "OLD" THINKING, THE LONGER YOU'LL BE LEFT BEHIND.
So far, we've made triple-digit returns in the REAL ESTATE SECTOR. . .We've made 63% and 46% returns in GOLD PREFERRED STOCKS and GOLD STOCKS. . .We've just gotten involved in GOLD COINS, but they're already up strong out of the gate. . .We've bought FARMLAND in Argentina. And currently I'm investigating our opportunities in other "commodity" investments, which have been in bear markets for decades and are now cheap. We are thinking outside the box, and it's paying off big time.
Forget about stocks.
Forget about the "old rules" of how much should be in stocks and bonds. And be willing to consider anything where the risk is low and the potential rewards are high. Don't be afraid if you're neighbor is not doing it. . .or if he thinks you're crazy. Just do it.
It's exactly what we've been doing all along, and it has been enormously successful. I urge you to do the same. Good investing, -Steve.
Dr. Steve Sjuggerud has worked in the investment world as a stockbroker, the vice president of a $50 million global mutual fund, an international hedge fund manager, and the director of several research departments. An international currency expert, he is also a member of the Oxford Club advisory panel. Today, Dr. Sjuggerud runs his own 20,000-member investment advisory service called True Wealth.