“Any thoughts about persistent safe havens (other than perhaps cash under your mattress) are dangerous,” warned Jim O’Neill, Chairman of Goldman Sachs Asset Management.However, the market sceptics would argue otherwise.
The most popular so-called safe haven — an asset class that doesn’t lose value — is probably gold.
But gold can be heavy and costly to store. Furthermore, with gold trading at historically high levels, the die hard sceptics have turned to everything ranging from art and whiskey, to esoteric currencies.
Many traditional and unorthodox opportunities are available that may offer a positive return and/or protection against inflation. You might be surprised at what cracks this comprehensive (but not exhaustive) list of safe havens.
The ability of guns and ammunition to store value makes them an appealing investment option on their own merits. According to ammo.net, the price of Remington .223 rounds rose 224 per cent from 1999 to 2011 -- well above the rate of inflation.
Gun sales spiked after the election of Barack Obama in anticipation of more stringent gun control laws.The Wall Street Journal reports that a similar boost in sales is expected in the event of the President's re-election, and also notes that the supply of guns has not kept pace with demand.
Earlier in 2012, CEO Michael O. Fifer of Sturm, Ruger & Co. suspended the acceptance of new orders after 1Q sales exceeded expectations.
Sources: Wall Street Journal, Sovereign Man
According to the Financial Post, foreign purchases of Canadian bonds reached a record $16.7 billion in May 2012.
Jeff Herold and Maria Berlettano, fixed-income portfolio managers at J. Zechner Associates, indicate that central banks concerned about their exposure to the European debt crisis have turned to Canadian bonds as a safe haven. Canadian bonds have retained a Triple-A rating.
Source: Financial Post
The Wall Street Journal reports that central banks around the world have increased their reserves of yen by 22 per cent over the past four years.
Japan's currency appreciation has been greater than anticipated, especially relative to the USD, fueling market expectations that Japan will intervene to weaken the yen.
J.P. Morgan has recommended buying yen during economic downturns, as it 'rallies because its zero cash rates encourage its persistent use as a funding currency during global expansions, thus obliging investors to repurchase it during deleveraging.'
Sources: Reuters, Wall Street Journal
Though some might believe this commodity's performance is tied to the housing market, timber has a history of strong performance vis-à-vis inflation. Larry D. Spears writes that timberland values increased by an average of 22 per cent per year, compared to inflation averaging 9.2 per cent from 1973 through 1981.
R. Dennis Moon, managing director of U.S. Trust's specialty asset management division, has a client in Long Island investing $50 million in timberland.
Source: Barron's, Money Morning
The Handbook of Personal Wealth Management states that stamps have one of the 'best and longest-standing track records of stability and success' among physical assets. Though fragile, old stamps retain their value like collectible cars or rare comic books.
PIMCO's Bill Gross has a stamp collection valued at an estimated at $10 million, much of which he has auctioned off for charity.
Sources: CNBC, Handbook of Personal Wealth Management
Swedish, Norwegian, and Danish bond yields have all decreased amidst doubts regarding the solvency of eurozone debt.
DNB, a Norwegian bank, has even developed new types of bonds to meet increased foreign demand.
Rob Stewart, head of fixed income and currencies at Rothschild Wealth Management, touts Sweden, Norway, and Denmark as safe havens whose bonds are likely to remain strong.
Sources: New York Times, Investment Europe, Wall Street Journal
The Mei Moses index, which tracks the price of artwork, has beaten the S&P 500 six times over the past decade. Bond expert Jeff Gundlach called artwork a more portable version of gold that achieves the same store of value.
Since 2009, Sotheby's stock has gone from a low of 6.47 to a current price of 30.58, a reflection of the bull market for artwork.
Sources: Business Insider, Yahoo Finance
The Aztecs made extensive use of cocoa beans as a form of currency in their barter system. Likewise, early Americans -- who were among the world's leaders in alcohol consumption per capita -- used whiskey as a medium of exchange. The book 'SWAG' includes wine along with silver, artwork, and gold as investment opportunities that hedge against inflation.
Peter Luzer, a director of the Wine Investment Fund, expects annual returns to range from 12.5 to 14 per cent.
Sources: Food & Wine, Sovereign Man, SWAG: Alternative Investments for the Coming Decade
According to the Wall Street Journal, foreign investors hold a higher percentage of Japanese debt than any time since 1979.
Monetary inflows into Japanese bonds are based on its perception as a safe haven, though Japan is burdened with an unsustainable ratio of debt-to-GDP and bond yields remain low.
Source: Wall Street Journal
The scarcity of rare coins ensures retention of their value. The price of the 1907 $20 St. Gaudens gold coin went from under $2,000 prior to the recession up to $2,720 this October. Simon Black notes that unlike gold or silver, whose supply levels can fluctuate, the supply of rare coins cannot increase -- enabling them to serve as a reliable store of value.
Sources: Sovereign Man, NGC Coin
Jim Grant of Grant's Interest Rate Observer likes the return on investment on black walnut trees over Treasuries. He estimates that a $5 seedling can turn into a $1,000 tree in around 25 to 30.
Sources: Daily Reckoning