December 11, 2006: Stocks and bond notes

Just when you least expect it......

Safe to say most of us have done quite well with our portfolios this year. From time to time, we all feel invincible when the goldilocks scenario arrives. However, we also know that the perfect storm may impact when we least expect it.Then, those with truly diversified portfolios are glad they had the insurance that reasoned and varied bets provided.

Short of buying a sharia-certified mutual fund, I think reasonable prudence at this stage is called for. One area that I would not recommend a lighter position on is aero-defense stocks (posted regularly on this blog). Regardless of how Iraq is played out (my position has been for the past four months that we would be practically out by July, 2007 due to military contract orders that predict future armed forces events), the world situation for the United States will become more hostile, especially in the Middle East and South America. China remains our number one threat, and our vast military research and development team is working at top speed to stay ahead in the technological weapons race.Democrats will not touch this area.I like Canadian banks such as Toronto Dominion (TD) and Bank of Nova Scotia(BNS) because they are not exposed to anti-United States harassment,yet have excellent international exposure and a strong North American presence.I like iShares Switzerland (EWL).

Regarding energy, Claymore has launched two very interesting ETF's. Claymore MacroShare Oil Up Tradeable (UCR) which allows the investor to take a long range bet on rising energy prices, and Claymore MacroShare Oil Down Tradeable (DCR) which does the opposite. The mechanics are too complicated to discuss in this post. I recommend you go to www.Claymore.com and read about these yourself. Perhaps if an investment is too eclectic to comprehend after one reading, it should not be bought in the first place. I predict these two ETF's will be traded in large volume compared with other ETF's offered or projected.

Bonds can be a safe haven. Some pros like trust preferred and closed-end income funds rather than high rater corporate or government securities due to yield and potential capital gain upside when the economy goes south. Some like convertible securities, paying you interest while the market eventually recovers and you then gain on a resurgent stock price. A few are still touting Canadian income trusts, that I addressed a short time ago (my recommendation and probability scenarios still stand). Others are even recommending Ford and GM Bonds, reasoning that FOR SURE these companies will not roll over.

Precious metals bugs are almost always bullish. I am not a supporter of their cause. However, a little platinum, copper, coal and gas (natural, liquid and propane) might be nice in your portfolio.Chesapeake Energy took a hit last week after issuing another 30 million shares of stock that will fund future acquisitions. CHK is a strong BUY in my opinion. This superbly run company will use the funds wisely, creating value for the future.

Whatever your views on the above investments, please take a look at what you are invested in - and why. And beware world political events. This is the 1930s, not the 1950s-1990s.