Where to invest in 2012

Basically, we haven´t changed our opinion that much. As our followers know, we start our portfolios from a risk management perspective. The main risks we find are:
  1. Currencies: as everyone is QEasing, we may see strong changes in Forex. Also the euro could collapse, and we have to take it into account.
  2. Future inflation: it might happen or not, it´s not clear, but, again, too much fiat money could send us to a high-inflation path.
  3. No-growth economies: the companies are doing well, but perhaps we are slowing down "the machine" too much with low wages (nobody buys), no credit...
So, for 2012 we think that it´s fundamental to have other currencies in our portfolios, either directly (money market funds) or through other instruments (real estate abroad, shares...). There are better currencies from a macro point of view that others (link to Currencies).

In case of inflation, it´s better to own "real assets", instead of promises like bonds. Real assets are real estate (one should choose the right country, though, follow The Economist ranking, and wait for Spain 3 years), shares, and commodities.

If we see no growth, we have to choose shares which can get easy cashflow, stable companies with solid dividend payments. We have to be prepared for a strong fall in the financial markets, so if we don´t have any positions open, we could start with small purchases every month.

Useful commodites could go down if the economy keeps on slowing down, and could go up if the paper money keeps on increasing. As we don´t know, we avoid them. Gold is a good deflation hedge, but it´s really expensive right now. A small amount of gold could make sense as insurance. Agricultural commodities are probably the best pick, as the increase in unforseen events is part of this new century.

Of course, we think we shouldn´t have many bonds in bad currencies.