Top Picks 2007: Weiss offers "Prudent" play on global income

Posted Dec 30th 2006 2:30PM by Steven Halpern
Filed under: Newsletters, Mutual Funds, ETF Investing

Each year Steven Halpern, editor of TheStockAdvisors.com, surveys the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is part of his 24th annual Top Picks Report.

Prudent Global Income Fund (PSAFX) is the favorite conservative idea for 2007 from Martin Weiss. The editor of Safe Money Report explains, "The dollar started falling sharply late last year, stabilized a bit this past summer, and is now getting shredded again.

"The main reasons are that we are running gigantic trade deficits month after month after month, and that we owe more to foreign creditors than at any time in history. In addition, our economy is sliding -- while others around the globe are powering ahead.

"This is a big deal in the currency world. International portfolio managers are constantly shifting funds to economies with stronger growth and higher interest rates. If U.S. rates come down a bit -- or even remains flat -- while rates overseas climb, these investors could pull out of the dollar in droves.

"Since the Prudent Global Income Fund is concentrated in short-term foreign government debt, it's largely resistant to interest-rate rises and bond price declines. Moreover, its portfolio is mostly denominated in foreign currencies. When the dollar slumps, everything you own in foreign currencies naturally goes up in value.

"Its euro investments, mostly in Germany, are rising nicely due to expectations that the European Central Bank will keep hiking rates. Its Asian currencies are also moving higher amid optimism about regional economic growth. We think this is just the beginning of what could be a much broader money shift.

"In addition, it sticks to government securities, while avoiding higher-risk corporate and junk bonds. And it keeps the maturities on its investments short -- generally one to three years. That helps insulate the fund from both the risk of defaults and the risks associated with inflation."

To see Martin's favorite speculative idea for 2007, click here.