"Fair is foul and foul is fair." So say the three witches in Act 1, Scene 1 of Shakespeare's Macbeth, and so could be said of Act 1, Scene 1 of a new investment year.
Wall Street, like the three witches, is full of contradictions. The trend is your friend, but then the herd suddenly rotates into something once thought foul. Therein lies the attraction, or perhaps the hope, of alternative investments: getting to some unnoticed investment before it becomes mainstream.
Herewith, a witch's brew of alternative investing ideas:
An Unappreciated Metal
It's hard to recall now, but there was a time when investors concerned themselves primarily with stocks and bonds, before commodities became all the rage. While 2010 was a boon for virtually every asset, there was magic most of all in metals. Gold had its 10th consecutive up year, silver was up 84%, palladium up 97%; platinum, copper, tin — they all soared.
The prize for most creative alternative investment idea may go to South African investment advisor Prieur du Plessis, who seems to have married the powerful "trend is your friend" conceit — after all, owning real assets is still indicated in these wobbly economic times— with a metal that seems to have escaped the herd, to whit: rhodium.
In his Invesment Postcards blog, du Plessis comments on"how severe the plunge of rhodium in 2008 was and how 'tame' the subsequent recovery has been, at least when compared with other precious metals." Du Plessis says the crash occurred as a result of plunging car sales, since rhodium's main industrial use is in catalytic converters for automobiles. As the rarest of precious metals, rhodium would seem to be subject to a steep price hike if economic recovery takes hold and the automotive trend in Asia continues apace.
Best of all, what makes this the most alternative of alternative investments is the near impossibility of investing in it — unless you're adept at buying Royal Bank of Scotland perpetual options listed on German's Scoach or Euwax exchanges.
Have any friends in Frankfurt who can walk you through this?
There are all kinds of mining companies that extract rhodium along with palladium, silver, platinum and gold. And, because these other metals have gone gangbusters, those mining companies are far from undiscovered; they're mostly close to 52-year highs. In short, until someone figures out how to safely extract rhodium from used nuclear fuel — another potential source for the metal — there are no available pure plays that are convenient to buy. Unless, that is, you desire a hunk of the stuff. The Cohen Mint in Brooklyn, N.Y., sells rhodium bullion coins and bars. The commission would be well worth it if rhodium (current spot price: $2,580) were ever to get even close to its peak 2008 price of around $10,000.
Some Rice Would Be Nice
Even as metals were shining, another commodities theme — agriculture — has been growing. Over the past six months, baskets of agricultural commodities have gone straight up — between 30% and 60%, depending on which index you're looking at.
Let's assume that 2011 is not going to be a year where throwing a dart at a commodity list will automatically produce great results; this assumption could be incorrect, but I prefer to be conservative. So, which grain will bring gain? According to commodities bull Jim Rogers, some rice would be nice. A few months ago, the famous "investment biker" and hedge fund manager predicted silver and rice are headed up. This week, Rogers reiterated his optimistic view in an interview with the Economic Times of India. "If rice goes down, I will buy more rice. So both the silver and rice have a great future for the next few years," said Rogers, a bull in a China shop if ever there were one.
