Related topics: gold, ETF, commodities, investments, mutual funds
Dedicated gold investors will get crushed by the market as economic themes change and the decade ahead produces upbeat results for stocks, says newsletter editor Jim Lowell.
"There's a big fly swatter that's about to squash gold bugs," said Lowell, editor of the ETF Trader newsletter, published by MarketWatch. Lowell made his comments during an appearance on the "Your Money with Chuck Jaffe" podcast.
"Gold is about to go bust," Lowell said. "There is not a supply issue with that commodity . . . and as soon as world banks decide that one way to bail out their fiscal mishaps (is) to sell gold at historically high prices -- gold that they were buying in metric tons last year -- you'll see a run on gold to the tune of 20% to 30% to the downside."
Lowell also had bad news for bond fund investors, who he thinks will get hurt by a turn in interest rates coming in the next 12 to 18 months.
"If you continue to park your money in what appears to be a safe bet -- namely, longer-term Treasurys -- you are going to see either a flat line or actual losses by the end of this decade," Lowell predicted. "And the road will be very volatile. Don't forget that when rates rise just 1%, a long-term Treasury bond fund will be down 18-20% in terms of return."
Lowell expects the stock market to do well for the next decade; today, he favors mega-cap domestic stocks.
"This is the decade where the equity markets truly build wealth," said Lowell, who noted that now is the first time in about five years that he think portfolios should be tilted toward stocks.
"I bet from here to eight years out we are going to see an annualized rate of return in the marketplace of probably between 8.5% to 10%. That may not sound spectacular, but it's more than enough to double your return."
Lowell said that he also likes so-called soft commodities -- corn, wheat sugar, cocoa, cattle, cattle feed -- and recommends the PowerShares DB Agriculture (DBA) ETF as a way for investors to make that play.
During the "Hold It or Fold It" segment of the podcast, when guests give their opinions on investments named by audience members, Lowell put "buy" recommendations on the Fidelity Leveraged Company Stock (FLVCX), Fidelity Global Balanced (FGBLX) and Fidelity Select Energy Service (FSESX) funds.
Given his forecast on precious metals, it's no surprise that Lowell recommended selling SPDR Gold Shares (GLD, news) and iShares Silver Trust (SLV).
He also suggested that investors give up on the Fidelity Magellan (FMAGX), Fidelity Balanced (FBALX) and Energy Select Sector SPDR (XLE) funds, and said that his concerns about rising interest rates are pushing him out of the Fidelity Inflation-Protected Bond (FINPX) and Fidelity Convertible Securities (FCVSX) funds.
| Buy, sell or hold? | ||
| Fund | Category | 3-year return (annualized) |
|---|---|---|
| PowerShares DB Agriculture (DBA) | Natural resources | -5.40% |
| Fidelity Leveraged Company Stock (FLVCX) | Midcap blend | 0.06% |
| Fidelity Global Balanced (FGBLX) | World allocation | 4.60% |
| Fidelity Select Energy Service (FSESX) | Energy | -1.80% |
| SPDR Gold Shares (GLD, news) | Precious metals | 13.90% |
| iShares Silver Trust (SLV) | Precious metals | 22.30% |
| Fidelity Magellan (FMAGX) | Large-cap growth | -2.80% |
| Fidelity Balanced (FBALX) | Moderate allocation | 2.60% |
| Energy Select Sector SPDR (XLE) | Natural resources | 2.20% |
| Fidelity Inflation-Protected Bond (FINPX) | Inflation-protected bond | 4.00% |
| Fidelity Convertible Securities (FCVSX) | Convertibles | 4.20% |
