by Steve McDonald, Bond Strategist, The Oxford Club
Friday, January 25, 2013
In focus this week; global gorillas, platinum costs more than gold and, of course, the sitfa.
According to Market Watch the global gorillas, large multinational companies that offer more stable access to the emerging markets, which will account for 80% of the growth in the world in 2013, are one of the best plays in this market and will offer growth and stability for many years to come.
These companies have all weather management teams, established markets and large workforces but are still nimble enough to play some of the smaller developing opportunities. This willingness to look beyond the BRICs gives them greater return opportunities in infrastructure, food and mobile bandwidth.
David Darst, Morgan Stanley’s Wealth management Chief Strategist says this is the end of the world as we know it and we must embrace the massive demographic changes we are seeing in the developing world.
Let the changes push you, don’t fight them, said Darst.
He called the Global Gorillas one the trends of 2013 you must watch.
These gorillas are essentially the S&P 100 Global Index (NYSE: IOO) which includes some of the biggest and best established companies in the world, and MarketWatch thinks it is the best emerging market play for the average investor.
The IOO is referred to as emerging market lite because it does not offer a pure emerging play but also does not have the tremendous volatility inherent in most of the EM’s.
The international pain period seems to be over and if you’re looking for a way to play the emerging markets without the wild ride most offer, take a look at the IOO. The top 10 holdings are on your screen now and as you can see you are in good companies, many with good dividends, and solid exposure to the top picks in what is certain to be the growth story for the next 50 years.
The IOO, take a look.
Platinum on the Rise
Platinum has many more industrial uses than gold and, according to MarketWatch’s Myra Saefong, its move above the price of gold in the last week is seen as evidence of greater economic confidence and perhaps an end to the fed’s bond buying program.
When the gold platinum ratio is low it points to weaker economic conditions and weakness worldwide. Platinum reacts to improving economic conditions and this recent move is coming as good news for those weary of five years of monetary and economic problems worldwide.
Tim Murray of precious metals marketing at Johnson Mathey said in a recent article that gold and platinum are both precious metals and will run together, but platinum responds more to news from the industrial and auto side.
Platinum is particularly sensitive to supply issues since it is 30 times more rare than gold and cannot be recycled as easily. So the fact that Anglo American Platinum Limited (OTC: AGPPY), the world’s largest producer of platinum, said it would close operations at two mines, could be adding to the run in price.
But the current rush to the silvery metal is seen as adding growth to portfolios rather than the wealth preservation of gold.
Saefong said, if you’re looking for savings, gold is your play, but platinum is the play for short term gains.
SITFA: Business Roundtable
This week it goes to the Business Roundtable. A group of 170 CEO’s who this past week offered solutions for the issues we face with Social Security and Medicare.
No magic here really, their ideas were nothing new:
Raise the retirement age from 65 to 70, means test for benefits, in other words you get fewer to no benefits if you have enough money and use Chained CPI to reduce the amount of inflation adjusted payment increases for Social Security. I mentioned chained CPI in a segment here about a month ago.
Oh, by the way, these CEO’s who came up with these ideas make an average of $382,000 a year, that’s for CEO’s of privately held companies’. CEO’s of public companies make a whole lot more. Gary Loveman, CEO of Caesar’s Entertainment, who was quoted in the Journal article, made $28 million in the past five years.
And almost all of them would be exempt from the new retirement age increase to 70, and I’m sure none of them will be worrying about whether they can pay their bills with the new lower chained cpi inflation adjustment to their Social Security benefits.
That’s more than enough to earn the cheek smacker, but here’s the real slap in the face.
In the US, the average male retires at 64, the average female at 62. Not because they want to, but because of health issues and unemployment. Surveys show most would like to work to age 70.
You see, one of the highest rates of unemployment in the U.S. is in the over 55 age group because these same CEO’s are laying off their older workers. This is the group that is most likely to be fired or laid off.
Isn’t that cute? Make it almost impossible to get a job after the age of 55 and then raise the retirement age to 70.