No Safe Havens Left?

Diversification Has Never Been More Important

Written by Jimmy Mengel
Posted November 4, 2013

Yesterday, I watched in horror as my hometown Baltimore Ravens lost to a lowly Cleveland Browns team that we've beaten handily every year since 2007.

Only a few months removed from their thrilling Super Bowl victory, them Ravens are scrambling to find any type of balance at all...

Since they can't seem to gain any yardage from their running game, they have been forced to make quarterback Joe Flacco hurl the ball to a crew of rookie receivers and long-in-the-tooth veterans whose best years are far behind them — not exactly a recipe for success.

In football, as in finance, you never know which piece of your team (or portfolio) will crap out in any given week.

Case in point: If your running game doesn't show up, you'd better make damn sure you have a stable of reliable players on another side of the field to prop up the areas where you're floundering.

And if the stock market takes a dive, you'd better hope you have some hedge against it — whether with precious metals, bonds, real estate, or even cash.

While I was watching the brutal defeat of my team, my mind wandered to my stock portfolio. I want to make sure my stocks are diversified enough that it never suffers a beating like the Ravens did this past Sunday.

Here are a few ways to ensure your portfolio doesn't take a drubbing...

AreThere No Safe Havens?

In the miasma of blustery cable TV hosts and Wall Street shills masquerading as “financial experts,” Marc Faber is a beacon.

As can be expected from someone with the nickname “Dr. Doom,” Faber never sugarcoats his analysis. But in terms of the market right now, he actually sounds scared...

He's frankly stated there are no safe havens left.

Disappointing earnings, deteriorating technicals, and a decline in consumer confidence are keeping Faber up at night.

He doesn't think bank deposits, bonds, Treasuries, or equities are particularly solid:

There is no safe haven. Bank deposits are not safe, which used to be safe. Money in treasury bills is not 100% safe because there is inflation in the system and you hardly get any interest. Bonds are not very safe anymore because eventually interest rates will go up. Equities in the U.S. are relatively expensive by any valuation metrics you might use. I don’t see anything particularly safe.

It's times like these that asset allocation and portfolio diversification are crucial for financial stability.

Like in football, you need other players to step up if you plan on staying competitive. And without a well-diversified portfolio, you stand the risk of being blindsided — and not being able to get back up.

Faber recently revealed his personal diversification strategy. Dr. Doom himself has spread his assets around, in the hope that "they don’t all collapse at the same time":

I recommend an asset allocation of about 25% in equities; 25% in fixed income, securities and cash; 25% in real estate; and 25% in precious metals — gold, silver. I think I have around 25% in gold whereby I don't value my gold. I have it and it's my insurance policy. I think it is more important to make sure that one day when the so-called shit hits the fan — and I think the Fed is well on its way to creating that situation — you have access to your gold, that it is not taken away.

He is wise to do so. Unlike most establishment retirement plans, Faber actually keeps a quarter of his wealth in precious metals.

You can follow his lead easily and avoid financial ruin by taking a few easy steps...

Diversify, Outsider's Style

When researching and recommending any and all of the Outsider Club portfolios, we take diversification very seriously.

If you, like Faber, really want to safeguard your investments from market disasters, we have all your bases covered.

That's why we offer three distinct services that work deftly as a team to make sure you never find yourself flat on your back after taking a big hit in any given area.

My advisory, The Crow's Nest, has recently uncovered three diversified picks we are encouraging our readers to position themselves in: one "hidden" precious metals play, one long-term dividend player that I think will be the next Berkshire Hathaway, and the one hated sector that could spark the next bull market in energy.

Our Like Minded People service has a special section of the portfolio dedicated to complete safety from centralized power — which, in the face of weekly government scandals and power grabs, cannot be understated.

And Nick Hodge's Early Advantage has just uncovered a stock that could be the single biggest biotech story of the decade.

You don't have to end up like my beloved Baltimore Ravens, scrambling for a few points here and there.

You can fortify your portfolio to withstand any opponent, seen or unseen.

Prepare yourself now, because you never know where the hit is coming from... until it's too late.

Godspeed,
jimmy-mengel-signature-fixed

Jimmy Mengel

follow basic @mengeled on Twitter

Jimmy is a managing editor for Outsider Club and the investment director of several personal finance advisories, The Crow's Nest, and The Adventure Capitalist For more on Jimmy, check out his editor's page.

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