What to Buy If the Sky Is Falling
This column was originally published on RealMoney on Feb. 16 at 8:15 a.m. EST. It's being republished as a bonus for TheStreet.com readers.
RealMoney readers often ask me how to reduce exposure or correlation to the U.S. stock market, citing a litany of concerns: America's ever-growing need for foreign capital to fund its deficit; the threat of a weaker dollar; worries over higher energy prices. So it makes sense to explore ways to reduce reliance on the U.S. economy and capital markets.
Here are some ideas for a "Bomb Shelter Portfolio." Some of the concepts are rather extreme; I wouldn't recommend that anyone buy all of the investments listed below. However, a few of them could be the right way for you to create some diversification.
Most Canadian and Australian banks have a low correlation to the S&P 500. Both economies are driven by the supply and demand cycle for commodities.Canadian Imperial Bank of Commerce (BCM) and Australia's Westpac Banking Corp. (WBK) have long track records of zigging when the U.S. zags. Additionally, both have high yields -- 3.4% and 4.3%, respectively. If I had to choose only one, I would pick an Australian bank over their Canadian cousins because of Canada's proximity to the U.S. While the U.S. imports much of its resources, you've probably heard that the U.S. is the Saudi Arabia of coal. While true change in the dynamics of our oil consumption is hard to visualize, it's possible that through technological innovation we could end up using more coal for home heating and powering vehicles. Consol Energy (CNX) and Peabody Energy (BTU) are two good proxies for the coal industry. Is there anything more bomb shelter-like than uranium? This has been a small investing fad the last couple of years. Canada and Australia have the largest known uranium reserves: 12% and 30% of world totals, respectively.
Canadian Imperial Bank of Commerce (BCM) and Australia's Westpac Banking Corp. (WBK) have a low correlation to the S&P 500
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV