This post is part of a special annual report -- Top Stock Picks '09 -- in which TheStockAdvisors.com asked 75 leading newsletter advisors to select their favorite investment for the new year.
"As my favorite stock for 2009, I recommend that investors buy the SPDR Gold Trust (NYSE: GLD), a gold exchange-traded fund," says international investing specialist Vivian Lewis.
In her Global Investing newsletter, which focuses on ADR and other global issues that trade on U.S. exchanges, the advisor explains, "I think every portfolio needs an inflation hedge in a period of unbridled monetary easing and pump priming."
Lewis explains, "SPDR Gold Trust does not depend on the economy coming right nor is it a play on recession and doom. Forecasting the macroeconomic trends in the U.S. and worldwide is very difficult in the current unprecedented economic crisis.
"But there is one thing you can be sure of: the measures already taken by governments around the world to stimulate their enfeebled companies and unclog their banking systems will result in an inflation problem.
"The vast government deficits engendered by the bailouts and stimulus will eventually have to be addressed. There aren't many options.
"Countries around the world can raise taxes, unlikely because tax hikes would hinder recovery. They can cut spending but that will also hamper their economies. Given the interconnected world, I do not expect any government to show fiscal rigor when its trading partners are still being lax.
"There is only one way out: printing money. More money chasing the same amount of goods and services will cause inflation.
"Gold is the classic way to protect against inflation. Selecting individual mining companies is harder because they are different although if you get the right mining stock it may well beat the performance of GLD.
"Note that some gold-miners sell their future gold production forward to finance continuing to drill so they will not provide inflation protection. Others facing a shortage of cash in the current crisis may go under. But the precious metal itself is a perfect no-brainer inflation hedge."
Steven Halpern's TheStockAdvisors.com offers a daily look at the latest market commentary and favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.
Advanced Micro Devices rallies after settling Intel tiff
United Technologies fires up a deal with GE
Cramer on BloggingStocks: Not much time left for downside 
Reader Comments (Page 1 of 1)
1-02-2009 @ 5:42PM
satur9nine said...
Yet another advisor recommending gold as an inflationary hedge. The days of ultra-risky hedging is over! The average investor should not be investing in gold, here is why...
Hedging commodities is a strategy used when you know you will need a certain commodity and you want to protect the current price you are paying against future price fluctuations. Southwest airlines did a great job of this with oil since they use a lot of it.
Gold is not something that average investors are consuming on a regular basis. In fact when it comes to consumption and inflation people are likely to sell gold so they can buy the things they actually need like housing, food and clothes.
Gold prices are fairly volatile lately and are at a near an inflation-adjusted all time high. If you want to invest in an overpriced commodity that you don't really need why not try out fine art, beenie babies or rare tulip bulbs.
If you absolutely feel the need to invest in commodities then I suggest energy and agriculture, like cotton, oil, etc. There are many ETFs related to these. However commodities are risky! If you are just trying to stave off inflation then you should be weary of the volatility associated with commodities. Instead try REITs, TIPs, tax free municiple bonds. Better yet pay off your debt, credit card and mortgage!
But really who is worrying about inflation right now? Most people are now worrying about deflation, in which case cash is actually king. My recommendation is stop worrying about inflation and deflation and stop taking unnecessary risks. Invest in diversified stocks, bonds, and put only a tiny amount in useful commodities if you dare, keep enough cash around and pay off your debt, and finally forget about gold!
1-04-2009 @ 1:09PM
john mikitson said...
Wow, interesting. I wonder in case of loss of confidence in the US dollar, would one still retain whatever gains were made in gold mutual funds anyway/ What say you?