Slow Growth? So What, We're Still Making Money

Ever since the financial crisis of 2008, Americans have been plagued by the feeling that as a country, have squandered our surplus wealth and now, we are a nation in decline. After all, driving a Hummer was a status symbol just a few years ago.

But today you'll get far more dirty looks tooling around in a gas-guzzler like a Hummer.

On an individual level, Americans may feel as though we took asset prices (like houses) for granted, spent too much money and failed to save.

A similar situation exists for the country as a whole. Over the next decade America will be lucky to get 2% growth, says Gary Shilling. In his new book, "The Age of Deleveraging" Shilling calls it a "slow-growth" decade.

Dr. Shilling has published numerous articles on the subjects of business economics, analysis methods and forecasting. He is well known for his forecasting record throughout the past half century.

Shilling's reasons that guarantee slow-growth for the next decade include: American consumer retrenchment, bank deleveraging, increasing government regulation, developed nations shifting toward fiscal restraint and lower commodity prices that will limit spending in resource-rich countries.

Shilling is an economist, not an investor, but his analysis is first-rate. Known for being cavalier and a contrarian when it comes to economics, Shilling rarely holds back when it comes to his conclusions.
Although he is bearish on the future, he offers 10 investments that could help investors preserve capital, and even make profits, should his depressing forecast unfold. While some of the investment opportunities are obvious, he offers a few places that are overlooked by investors.

***I think it makes sense for all self-directed investors to consider Shilling's forecasts and consider how our portfolios are constructed should his predictions be accurate. I also happen to believe his forecasts are a bit bearish, so should be taken with a grain of salt.

I've put together two portfolios that can help individual investors achieve investment wealth in a slow growth economy. Both of these portfolios have stocks that are poised to benefit should Shilling's forecast come to pass.

My first portfolio is primarily a growth oriented portfolio of small cap stocks. You've likely heard me discuss this portfolio in the past. I love small cap stocks because they tend to post the biggest gains, even in a slow growth economy. You can learn more about the Small Cap Investor PRO portfolio by clicking here. Subscribers are currently up 65 percent, 55 percent, and 35 percent on recent additions.

My Top Stock Insights portfolio focuses on slightly larger companies, with growth and value investments. This portfolio has less volatility than Small Cap Investor PRO stocks, but not quite the upside potential. However, when you use both together you have exposure to dozens of growth and income stocks, from small caps, to mid caps, to large cap stocks too. You can learn more about the technology stocks I've been recommending to Top Stock Insights subscribers by clicking here. Subscribers are currently up 66 percent, 43 percent, and 24 percent on recent additions.

 ***Now let's take a quick look at Shilling's list.

Buy these 10 investments in the slow-grow decade 2011-2020

· Buy income-producing securities

· Buy American energy sources

· Buy factory-built housing and rental apartments

· Buy health care

· Buy the U.S. dollar

· Buy Treasuries and high-quality bonds

· Buy food and other consumer staples

· Buy productivity enhancers

· Buy small luxuries

· Buy investment advisers and financial planners

Buy income-producing securities: For example utilities, drugs, and telecoms. I like this recommendation because income or dividend paying equities are a great way to invest for the long-term. These stocks can combine the upsides of growth with the safety of income. We hold a few dividend stocks that fit into these categories in both portfolios.

Buy American energy sources:I would suggest that almost all commodities are great investments for the next 10 years since unprecedented fiscal and monetary stimulus from governments worldwide has fueled inflation concerns. I've been recommending gold and silver stocks too, and we're seeing these stocks perform extremely well.

Buy factory-built housing and rental apartments. I've been early to recommend a housing related stock to Small Cap Investor PRO subscribers. We're currently up 15 percent on the position, and while it's a contrarian investment at the moment I think this stock has potential to double over the next 12-months.

Buy healthcare. I always like a good healthcare company, but the sector has not shown much growth over the past three years. I'm looking at health care related investments to add to both the Small Cap Investor Pro portfolio and the Top Stock Insights portfolio right now.

Buy the U.S. dollar. I always recommend you keep a little in cash on hand.

Buy Treasury and other high-quality bonds. Great for retirement accounts but not our portfolio. With the likelihood of California defaulting on payments what bonds are safe anymore anyway?

Buy food and other consumer staples. This is a small industry, but gems can be discovered, sometimes. I've closed out related positions in Top Stock Insights over the last year with nice profits, and am always scouring the exchanges for good investments in this industry.

Buy productivity enhancers. This is my favorite recommendation. I love efficiency. If I did not believe in diversification every stock in our portfolio would be in this category. This is why I love technology, and both portfolios have ample exposure to productivity enhancing technology companies.

Buy small luxuries. This recommendation caught me by surprise, but it makes sense that consumers will put off buying a new car and pick up a luxury piece of furniture instead. I've recommended one consumer discretionary stock, and it's been a slow performer thus far. I'm looking to the holiday shopping season to give this company's stock a boost - if it doesn't happen I'll return to the sidelines and avoid this sector.

Buy investment advisers and financial planners."Low investment returns will discourage do-it-yourself investing and encourage the use of professionals", says Shilling. I think he is wrong there. People want more control over their investments decisions. Everyone has an online account now and they want the freedom to adjust it whenever. Additionally, these services are often subsidiaries of banks. You're reading Small Cap Investor Daily so you're already following this recommendation!

Feel free to send me specific questions on Shilling's recommendations, and what I'm doing to make sure subscribers to Small Cap Investor PRO and Top Stock Insights have the right exposure.

My inbox is always open at editorial@smallcapinvestor.com.