aftershocks will continue to shake Wall St
By Stephen Schurr
Published: September 20 2005 03:00 | Last updated: September 20 2005 03:00
It's time for investors to take a long, hard look at Hurricane Katrina.
Two weeks ago, still shell-shocked, I opted to write about charitable giving - a more pressing issue then, and now. As an aside, I noted that Wall Street had done a sincere job assessing the damage, and mentioned readers could email me for my thoughts on the best research on the hurricane. I received lots of queries, so I felt a follow-up column was in order.
The research could be bifurcated into two distinct camps: the former says Katrina's impact will be regional and the rebuilding will stimulate the economy (and possibly bring rate hikes to a quicker end), while the latter says the economic toll of Katrina could be the tipping point that ends this tired economic expansion and bull market.
My conclusion: Katrina will be far more damaging then Wall Street realizes. Investors should already have their behavioral-finance guns more toward fear than greed as it is, but it's time to push even further toward fear.
What investments look good right now? Gold, which I plugged back in November, crossed $450 an ounce last week to hit a 17-year high and looks poised to rise amid concerns about inflation. At worst, it's an insurance policy on your portfolio; at best, it crosses $600 sometime in 2006. The gold ETF, StreetTracks Gold Trust, is an easy way to own a piece of the metal. Increasing one's cash stake is a reasonable safety move right now.
Also, I remain fond of most things energy-related, Canada-related and dividend-related. The best one-stop shopping would be Canadian energy trusts such as ARC Energy Trust, Enerplus Resources and Enterra Energy Trust. These trusts own interest in oil and gas wells and pay out huge chunks of their profits to investors. The shares have had stunning runs over the past two years, but they are likely to get a boost later this year as the trusts are added to the S&P/TSX Composite index.
Many investors don't have access to Wall Street research, and it's a shame. But there's also some great free research out there too!
Richard Benson, (www.sfgroup.org). Specialty Finance Group's Richard Benson likes to sound alarm bells, especially on inflation. "The last thing inflation needed was Hurricane Katrina's devastating impact on oil production……The inflation numbers for August and September in the US should look real ugly. While Congress seems intent to increase the budget deficit by as much as $150 billion to rebuild the south, we will watch the Federal Reserve response very closely and like many foreign investors, be ready to dump the dollar if the Fed once again listens to the mob's cry for easy money".
Above is an excerpt from Richard Benson's article entitled "Inflation Raising its Ugly Head" dated September 9, 2005.