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12/29/2011 @ 6:06PM |1,538 views
Best Long And Short Investment Ideas For 2012
Charles Biderman , Contributor
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As I speak, gold continues to weaken in price. I expect gold to continue to sell off perhaps a bit more. But the facts are that the European economies are declining and that stealthily, the European Central Bank, the ECB, has been printing trillions of new euros.
Therefore, to me, the best trade idea for 2012 is to go long gold and short the euro on a dollar cost average trade each month. Yes, gold is down 20% from its high. But what I most like about gold is that emerging market central banks remain consistent buyers of gold.
It would make sense to me for emerging market central bankers given the dollar, euro and Yen printing to be a consistent buyer throughout 2012. If you don’t want to invest in gold directly, try an exchange-traded fund like SPDR Gold Shares (GLD ).
For what it is worth, I would recommend also buying commodity stocks using non-U.S. dollars, in other words, buying Canadian, Australian and New Zealand commodity producers in their local currencies; again on a dollar cost basis. That way you are not only long commodities, but also short the U.S. dollar vs. the non-US dollars.
I was on Bloomberg TV this morning at Pier 3 in San Francisco. In chatting with several reporters, I had an epiphany. Almost all financial reporters and stock market investors are hoping and praying for a miracle to occur so that in 2012 the U.S. and global economies grow their way out of the current financial mess.
That hope for a miracle is conditioned on what has happened in the past. Ever since World War II the U.S. economy sooner or later has rebounded sharply thereby fixing all the problems that showed up during the downturn. Since it has always happened in the past, most investors and even cynical Wall Street professionals deep down inside believe that a miracle will occur and robust economic growth will magically appear as it always has in the past.
That’s why Wall Street professionals believe that printing trillions of dollars of new euros and U.S. dollars is OK if indeed very rapid economic growth starts soon; which would then make refinancing all that new paper much much easier.
However, those of us who are willing to look and face reality do not see any miracles coming down from heaven anytime soon. The ultimate solution has to be a total restructuring the European and U.S. economies to where entrepeneurial activity is encouraged and where government spending is closely related to government income.
Clearly there is no political will to actually solve the real problems. Instead the political will is to kick the can down the road and pray that a miracle will occur before the can becomes too big and impossible to kick any further.
Charles Biderman is president & CEO of TrimTabs Investment Research.
