What's up

Sorry, it's been over a month since my last update. I've just been busy at work, and haven't been doing any trading really. So what's up? well not much... mostly everything is down.

Can you believe this: The Dow Jones and S&P500 are down 24% Year-To-Date already. Yep, even after the huge drop at the end of 2008, if you jumped back in the markets on Jan.1, 2009, you'd be down about 25% now just over 3 months later. So much for the advice you've been hearing people give about buying when things are "cheap" and holding for the long-term, since stocks always go up in the long-term :) Try telling that to Japan, where over the last 20-years (which is quite long-term), the stock market has dropped 80%.

What's in the news today... In the U.S., 11% of mortgages are delinquent (behind in payment by 1 or more months) or in foreclosure. Unemployment is already over 8%, and will hit double digits soon. GM is going under. et-cetera.

So if everything is going to the crapper, what do you invest in? Here are some ideas, mostly from the pages of Sprott of course:

1. Gold. Not mining companies, but gold bullion. You can hold this through an ETF like GLD or ETNs like DGL (or DGP, it's double-leveraged counterpart), or you can buy gold coins, and it looks like Sprott is coming out with a gold bullion fund soon. While gold could skyrocket in the coming years, don't use it to try to make a lot of money; Use gold to preserve your wealth in these troubled times.

2. Oil. Not oil companies, but oil itself. This is a more long-term idea that I've talked about before. Oil cannot go to zero. We are running out of oil. Right now, demand for oil is low, and yes the price of oil could go lower (and I've lost money on paper because of this), but the demand for oil is not going to go away anytime soon, and the price will go higher -- much higher. So if you can handle potential short-term losses for long-term gains, now's the time to get into oil. You can participate in oil through OLO (or double-leveraged with DXO), or the canadian ETF HOU, or even USO.

3. "Recession-proof" stocks. I really like Jean-Francois Tardiff at Sprott. He manages a couple of the Hedge funds there. On BNN recently, he picked 3 "recession proof" stocks, all of them income trusts, as good investments for 2009:

1) SIF.UN Energy Savings Income Fund - sells natural gas in 5-year fixed price contracts to residential homes. No matter the price of natural gas, they will always make a profit since they fix their margin (e.g. buy 5-year gas contracts at price X and charge the customer price X + 20%). Number of customers is growing strongly. The yield of this income trust is currently around 12%.

2) FMD.UN Future Med Healthcare - distributor of hundreds of healthcare products mostly in Ontario. They just bought a company in Quebec. Expect revenue growth because of the acquisition. Yield is currently around 12% and likely to be increased.

3. LIQ.UN Liquor store Income Fund - the whole idea that in bad times we drink :) This company just acquired a competitor, which was much more aggressive in pricing. With that competition gone, their profit margin should grow. Price has dropped a lot, so yield is now around 15%.

Assuming no changes in distributions, if these income funds' stock prices were to remain flat through 2009, you'd still make over 12% from the distributions alone. Just remember that these distributions count as income (not dividends or capital gains), so you would be taxed on the full amount, so you'd probably want to hold them in an RRSP or TFSA.