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Buy Silver, Platinum, And Palladium To Hedge Inflation

Gold is overpriced compared to historical valuations against other precious metals. Platinum and Palladium are historically cheap. Silver is cheap enough and comes with robust demand. Buying the cheapest metals should provide the best inflation hedge. Diversifying your precious metal holdings will reduce some of the risk. Many governments across the world are in excessive debt. Everyone is worried money printing in the form of quantitative easing will be the only solution. Even now, with deflationary pressures all across the world, it seems the solution for all governments is to devalue their currency to increase exports. With the exception of the British Pound, every major currency in the world has devalued against the U.S. Dollar this year. This has led to deflation within the United States in the form of cheaper imports such as oil, but high inflation outside the United States. This is only temporary, as the United States will eventually have to devalue their currency to compete internationally, fueling the never ending spiral of currency debasement and inflation. Deflation is only temporary; long term inflation will always be the case with fiat no matter which currency you choose to favor. I am not making a case against fiat. I believe any portfolio should have lots of cash due to its optionality. I am also a proponent of the fiat system, the flexibility it affords governments, and the way it allows currency to expand with increasing populations and growing economies. However, I am making a case to have some precious metals as a contingency should this never ending spiral of currency debasement build too much momentum. This is to make your portfolio more robust to a variety of different scenarios, rather than to predict a high inflation situation. I believe now is an opportune time to buy some precious metals since a more expensive U.S. Dollar has lowered the prices. This opportunity might only be temporary, as the United States will eventually need to devalue its currency as well, both to compete in international trade and to pay off its own debt. Fortunately, you can easily invest in precious metals by purchasing shares of exchange traded trusts. You get ownership rights to the metals while knowing they are stored securely behind vaults for a small annual fee. You can also purchase the bullion through trusts very near to the market price of the metal. In contrast, if you buy physical bullion directly then you must pay a premium over the metal’s market value, which can be as low as 4-5% or as high as 30%, depending on the quantity you buy, which country you buy it in, and the form you buy it such as bar or coin. These higher premiums are a deal killer to me in most cases, as I cannot afford to buy in bulk. The trusts I’ll mention in this article are the following: SPDR Gold Trust (NYSEARCA: GLD ); iShares Silver Trust (NYSEARCA: SLV ); ETFS Physical Platinum Shares (NYSEARCA: PPLT ); ETFS Physical Palladium Shares (NYSEARCA: PALL ). Gold is obviously the best choice as an inflation hedge. This is due to its long history as a currency as well as its intrinsic demand as a beautiful, ornamental metal. Unfortunately, gold is very expensive right now. It’s not as expensive as it was a few years ago in 2012, but it’s still very high priced compared to historical standards. I believe at current prices of $1,158 per ounce, gold already accounts for a major currency flight or high inflation scenario. I say this because I can still remember buying an ounce of gold in 2003 at $350 an ounce, which I considered a fair price back then. There are better options than buying gold at today’s prices. These options are silver , platinum , and palladium . All of these metals are relatively inexpensive compared to gold, and all of them are priced significantly below their historic market highs. Let’s take platinum as an example, valued at $1,019 per ounce today. Platinum is currently more than 50% cheaper than its 2007 high, and almost equal to its price in 2005. However, its price in 2005 does not reflect inflation over the last ten years, so today’s price is even cheaper than that. Granted, there were some fundamental changes in the industrial demand for platinum, as auto manufacturers began alternating cheaper palladium in place of platinum to make catalytic converters; this effectively lowered the price of platinum and increased the price of palladium. This is why I recommend to own both platinum and palladium, since they can be used interchangeably in some instances, it lowers the risk to have some of both. This brings me to my next point. It is best to diversify across your metals to reduce the risk of industrial demand falling off for any single one of them. This is why I think holding silver is beneficial to go with platinum and palladium. At approximately $15 per ounce, silver isn’t quite as cheap as the other two metals, at least according to historical standards. Its current price is roughly 200% higher than its approximate price in the mid 1990s at around $5 per ounce. Even so, its value in relation to gold is low, as the gold price to silver price ratio is approximately 77 right now, whereas ten to fifteen years ago is hovered around 45. I believe an admixture of platinum, palladium, and silver is a good way to hedge against inflation, and it is my personal opinion that these three metals combined, at their current market prices, present significantly less risk than holding gold. I think 10-15% of a portfolio allocated to these metals is a reasonable quantity. Disclosure: I am/we are long SLV, PPLT, PALL. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Additional disclosure: The shares of SLV, PPLT, and PALL represent approximately 15% of my brokerage account portfolio.

An Analysis Of A Long MSCI U.K./Short S&P 500 ETF Pairs Trade

While U.K. markets have been trading downwards in the past month over Greece concerns, I see this as temporary. However, I still maintain that the S&P 500 index is overvalued. I see potential value in a long EWU/short SDS ETF pairs trading strategy. In a previous article written on May 22, I argued that a significant pairs trading opportunity exists through taking a long position on the FTSE 100 and a short position on the S&P 500. The purpose of this article is to both review the performance of this strategy in light of developments in June, and further discuss the strategy in the context of specific ETF performance. On a one-month basis, the iShares MSCI United Kingdom Index ETF (NYSEARCA: EWU ), which approximates the returns on the MSCI United Kingdom Index returned -2.34 percent, which has been less severe than the -4.24 percent return on the FTSE 100 over the same period. On the other hand, the ProShares UltraShort S&P 500 ETF (NYSEARCA: SDS ) has returned 1.05 percent this month. On balance, this would have been a losing pairs trade based on lower than expected stock market performance in the United Kingdom. However, is there a prospect of reversal in this regard? In my opinion, economic fundamentals in the United Kingdom are solid and returns are being driven lower in tandem with European shares as a result of uncertainty in Greece, which has seen the FTSE 100 hit a three-month low. However, I had previously expressed my optimism that an upturn in property markets in the U.K. would lead the index higher over time, and while U.K. markets as a whole are lower, construction firms have bucked the trend with firms such as Berkeley, Persimmon and Barratt Developments all seeing gains this month. In this context, I expect that while U.K. markets may see volatility in the short-term as a result of the Greek crisis, long-run growth will ultimately push the index higher. On the other hand, we have seen that the S&P 500 has been falling as expected this month by -0.75 percent and the inverse ETF returning 1.05 percent accordingly. I still maintain that US stocks have little room left to run in terms of valuation, and this is evidenced not only by falling returns but also concerns of potential overvaluation among large consumer discretionary stocks. For instance, an article from ValueWalk makes the point that while the segment had expected a 16.9 percent growth rate at the beginning of the year, it has seen the fourth-biggest decline in earnings growth expectations. Moreover, I had also stated in the previous article that while the S&P 500 had trended upward until recently, US equity inflows had been falling which had raised concerns of a pullback which we now appear to be seeing. To conclude, I expect that U.K. stock markets may undergo some short-term volatility as a result of the Greek crisis. However, I still see potential for growth once the initial contagion subsides, and maintain my view on a long MSCI U.K./short S&P 500 trade. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Vestas Has The Wind At Its Back

By Tim Maverick The once-respected stock of the global leader in wind turbines fell 96% from its peak in 2008 to its nadir in 2012. An almost-comedic series of managerial errors felled the stock. Foremost among these was launching a dramatic expansion plan in the midst of the 2008-2009 financial crisis, which caused many governments to cut back on subsidies for alternative energy. In other words, Vestas ( OTCPK:VWDRY ) ( OTCPK:VWSYF ) expanded right when demand was collapsing. By 2010, profit warnings were the norm for the Danish company, as stiff Chinese competition also began to bite. Vestas become an unwelcome poster child for the rise and fall of the global wind turbine industry. But now, years later and with a new CEO (brought on in 2013), Vestas has the wind at its back once again. The industry, too, is growing rapidly again. Comeback Kids Vestas’ new CEO, Anders Runevad, cut about one-third of the company’s bloated workforce and closed one-third of its factories. Runevad, unlike his predecessor, is focused on cash flow, not market share. He also had Vestas concentrate on improving three main areas: making its turbines more energy-efficient than the competitions’, growing its higher-margin services business, and pushing into offshore turbines (a big growth area for the industry). Vestas is also moving into the offshore business in a joint venture with Japan’s Mitsubishi Heavy Industries ( OTCPK:MHVYF ). So far, these moves have paid off. On May 6, the company raised its profit guidance for 2015. It reported strong demand for its products in China, the United States, and, in particular, Brazil. And, in the first quarter of this year, Vestas signed contracts to sell wind turbines with a total generating capacity of 1,750 megawatts. This pushed the company’s order backlog to a record €15 billion, and nearly half of that is from services contracts. Revenue in the first quarter rose by 18% to €1.5 billion. Earnings before interest, tax, and exceptional items soared 98% to €79 million. The backlog was the reason behind Vestas bumping up its 2015 revenue target by a billion euros to €7.5 billion. The company also raised its profit margin guidance to 8.5%, up from 7%. This set of results seems to have completed its turnaround in a Lazarus-like revival. It also boosted its stock price to a five-year high. But, in February, we saw the true sign of Vestas’ revival. The company announced it would pay its first dividend payment in a dozen years. The announcement came simultaneously with the report of its first full-year profit (€392 million) since 2010. Strong Tailwinds in the Forecast Looking ahead, it seems Vestas will have the wind at its back. From a financial standpoint, the company now looks strong. It has a large order backlog, no net debt, and a lot of cash. Plus, it holds nearly one-fifth of its current market capitalization in cash. The wind turbine industry also has strong tailwinds in its favor; installations are reaching record numbers. In fact, global wind generating capacity is forecast to double by the end of the decade! The rush into wind is being led by China, the world’s biggest wind-energy market. The Chinese added record 20.7 gigawatts (GW) of capacity in 2014, which accounts for 40% of the total installations globally. Another 77 GW of capacity is currently under construction. Wind is now China’s third-largest source of power, behind coal and hydroelectric power. Last year, grid-connected wind power capacity in China rose 26% to 96.37 GW, which accounts for 7% of the country’s total electric capacity. The No. 2 wind market, the United States, was also busy. It added 4.7 GW of new capacity in 2014 – a six-fold increase from 2013. All of this bodes very well for Vestas’ continued revival. Original Post Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.