Nouriel Roubini, known as “Dr. Doom” for his outlandish predictions on the economy, has a choppy forecast for the coming year. Back in May, Roubini predicted a tumultuous 2013 based on a combination of four factors, “stalling growth in the U.S., debt troubles in Europe, a slowdown in emerging markets, particularly China, and military conflict in Iran” writes Ansuya Harjani. Now, Roubini says that things are shaping up in favor of his foresight, as China is indeed faced with a slowdown, the euro zone is in shambles, the U.S. is sputtering along, and things in Iran have heated up once again [see also Doomsday Special: 7 Hard Asset Investments You Can Hold in Your Hand].
With a disturbingly accurate prediction of the future (although some would argue that all four of the aforementioned factors were already obvious at the time Roubini made his remarks), investors may want to keep their wits about them for the coming year. Whether you are a fan of Dr. Doom or not, these factors certainly have the potential to throw the global economy into a tailspin, potentially worse than 2008. Those looking to protect themselves before such an event have several options in the commodity space to safeguard their capital. Below, we outline three commodities to own if and when the “Perfect Storm” rains down on the world economy [for more commodity news and updates subscribe to our free newsletter].
Gold & Silver
Though you may have your preferences between the two precious metals, each will do a good job of protecting the value of your capital in the case of a market dip. Note that gold may be the better option of the two as it has less industrial use than silver, which will drag the white metal down a fair amount more. You can either own physical bullion (your safest bet) or utilize the physically-backed SPDR Gold Trust (GLD) and iShares Silver Trust (SLV) [see also Three Reasons Why Gold Is Overvalued].
There is not one specific commodity to choose from under the “hard assets” moniker, but you certainly have a number of options. Assets like antique guns, diamonds, classic cars, rare books, and a number of others will maintain their worth no matter what markets are doing, hence the attraction to these investments. Note that these will be relatively illiquid, but at the same time ensure that some rogue trader at a big bank won’t bring down the value of your capital.
Another relatively impervious commodity, tobacco certainly has its grips in the world. In fact, some people use tobacco more during tough times to help get them through. In good times and in bad, tobacco investments tend to perform relatively well compared to overall markets. One favorite investment of many comes from Phillip Morris International (PM), as they have a gargantuan market share as well as an enticing dividend yield [see also Jim Rogers Says: Buy Commodities Now, Or You’ll Hate Yourself Later].
Disclosure: No positions at time of writing.