{"id":313,"date":"2011-03-18T07:43:25","date_gmt":"2011-03-18T07:43:25","guid":{"rendered":"http:\/\/www.thebizsense.com\/views\/?p=313"},"modified":"2014-05-15T14:59:31","modified_gmt":"2014-05-15T14:59:31","slug":"ten-investments-to-buy","status":"publish","type":"post","link":"https:\/\/www.thebizsense.com\/views\/investments\/ten-investments-to-buy","title":{"rendered":"Ten investments to buy"},"content":{"rendered":"

Ten investments to buy<\/strong><\/p>\n

\"Gary<\/a>

Gary Shilling – The Age of Deleveraging<\/p><\/div>\n

Here are the ten investment categories that Shilling favours for the long term:<\/p>\n

\u2022 Treasuries and other high-quality bonds. He sees yields on longdated Treasuries (now about 4.7 per cent) falling to or below 3 per cent, delivering significant capital appreciation. The longer-dated the bond, the greater the appreciation.
\nIf the market value of a 30-year Treasury currently yielding 4.7 per cent were to move to a yield of 3 per cent over two years, that would deliver a combined capital gain if realized at that point, plus interest income, of nearly 42 per cent over the period (my figures, not Shilling\u2019s).<\/p>\n

\u2022 Other income-producing securities such as the stocks of utilities, consumer product companies, healthcare firms, and others that pay meaningful dividends that are likely to rise.
\nBusinesses that pay meaningful dividends are lower-risk because they\u2019re sending a message that they\u2019re generating the real earnings and cash flow needed to finance the dividend cheques, and they will almost certainly continue to be run in a prudent and stable manner.
\n\u201cThe only known return on equity investments is dividends\u2026 The rest are hopes and promises.\u201d
\nShilling notes: \u201cAnother reason that dividend-paying stocks are likely to be popular in coming years is a change in attitude by institutional investors, especially endowments and pension funds,\u201d because they got so burned by the collapse in values of alternative assets in the 2008 crisis.
\n\u2022 Producers and distributors of food and other consumer staples. Basic essentials continue to be bought in bad times as well as good, with a shift towards cheaper \u201cvalue\u201d products. Deflation cuts, or makes it easier to cut, business costs.<\/p>\n

\u2022 Suppliers of small luxuries. \u201cConsumers, especially when they\u2019re hard-pressed, tend to buy the very best of what they can afford, even if it\u2019s within a low-priced category.\u201d Top brands introduce lower-cost versions of their designer styles.
\nInvest in paper with pictures of dead presidents<\/p>\n

\u2022 The US dollar (relative to other currencies). Crises everywhere else drive investors into the greenback. It\u2019s the global safe haven. It will remain the world\u2019s reserve currency for the foreseeable future.
\nOther alternatives, such as the euro, are vulnerable. Gold is too narrow a market. Sluggish growth and deflation will be tougher on other economies and therefore their currencies than on America\u2019s.<\/p>\n

\u2022 Investment advisers and financial planners. They \u201cshould be in strong demand in the years ahead\u201d as \u201clow investment returns will discourage do-it-yourself investing and encourage the use of professionals.\u201d<\/p>\n

\u2022 Factory-built housing and rental apartments. With homes no longer viewed as investments, this will favour smaller and much cheaper factory-built dwellings, and families will increasingly prefer renting to ownership.<\/p>\n

\u2022 Healthcare. \u201cExplosive growth\u201d is almost guaranteed because of ageing populations, and it will be favoured by government job-creation programmes.
\nThere will be \u201clong-run winners among those that promote cost containment, such as diagnostic testing labs and diagnostic equipment makers, outfits that provide home healthcare services and supplies, and outpatient services and clinics.\u201d<\/p>\n

\u2022 Productivity enhancers. In a deflationary environment, \u201cincreased profits through price and volume increases will be difficult for many firms\u2026 Labour cost-cutting has been in vogue lately, but does have its limits. So anything\u2026 that helps customers to reduce costs and promote productivity will be in demand.
\n\u201cIronically, the very technologies that will continue to increase over-supply and promote deflation \u2013 computers, semiconductors, the internet, biotech and telecom \u2013 will be in demand to help combat its effects.\u201d
\nCost-cutting can also come from low-tech sources such as outsourcing of call centres and routine medical and legal work (using infotech), and temporary labour agencies.<\/p>\n

\u2022 North American energy. Concern in the US over dependence on imports from unstable countries will lead to promotion of local sources, despite their relatively high cost. Shilling likes regional producers of oil, gas and coal, the Canadian oil sands, liquefaction of gas, nuclear power. But \u201crenewable energy sources such as ethanol, wind farms, solar and geothermal all require heavy government subsidies that strike me as unreliable.\u201d<\/p>\n

Because I am not as pessimistic as Shilling, I don\u2019t agree with all his conclusions. For example, I think he is too negative on China and other emerging economies, and therefore on the outlook for commodities.
\nNevertheless, his book is packed with a lot of examples of how economies really work \u2013 so often in ways different from conventional opinion \u2013 and useful ideas about where to invest in the \u201cnew normal\u201d environment.<\/p>\n

* The Age of Deleveraging by A Gary Shilling, pub. by John Wiley & Sons. $39.95. ISBN 978-0-470-59636-4.<\/p>\n

CopyRight \u2013 OnTarget March 2011 by Martin Spring<\/p>\n

This article followed on from – 12 investments to sell or avoid<\/a><\/p>\n

and is part of the series starting with – Survive and Prosper in the Grim Decade<\/a><\/p>\n

\u2022 A surfeit of leading-edge production plants<\/a><\/p>\n

\u2022\u00a0Prediction: unemployment to continue rising<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Ten investments to buy Here are the ten investment categories that Shilling favours for the long 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