Robert Lutts, president of Cabot Money Management, made a recommendation of having gold in one's portfolio as a hedge against inflation. With the recent gold news headlines talking about gold price dips, now is the perfect time to buy coins to add to one's portfolio.
By Ethan Forman
March 7, 2012
DANVERS — There may or may not be gold in them thar hills, but if Robert Lutts has his way, it would be in your portfolio, along with some stocks.
Lutts, president of Cabot Money Management in Salem, made his recommendation about investing in gold as a hedge against inflation during a breakfast talk yesterday at the North Shore Business Expo.
"Inflation is starting to build, and in two or three years there is going to be a real problem," he said, adding that investors should start hedging now by moving into more aggressive and alternative investments, such as gold.
Lutts said gold is trading at about $1,700 an ounce. Last year at this time, it was $1,400 an ounce.
However, gold as an investment is hard to understand, he said, and he has yet to see large institutional investors "jump in, in a big way." Investors who don't want to buy physical gold, he said, can invest in it through exchange-traded funds.
Lutts, who characterizes himself as an "independent thinker," makes appearances on TV financial networks and has been quoted in leading newspapers, financial and otherwise. He has been keeping a close eye on the emerging markets in China, India, Brazil and elsewhere. One of the many slides he presented yesterday showed him in Mumbai, India, three weeks ago.
His point was that while India's Sensex stock index took a hit last year, it has had an annual return of 16 percent over the last 10 years.
Still, there is no shortage of things to worry about in the economy, from jobs, to a flat housing market, to the prospect of inflation, to the nation's $15 trillion debt, Lutts aid.
Still, he was upbeat about the U.S. economy, which he said is a global economy that drives jobs and economies around the world.
"If you just look at Apple Computer, look at how many jobs they have created all over the world," he said.
Also giving his "big picture" take on the economy during yesterday's breakfast was John Traynor, senior vice president and chief investment officer for People's United Bank, which recently acquired Danversbank. People's United is the largest bank headquartered in New England.
Turns out, Traynor and Lutts agreed on many points.
"We were looking for areas of disagreement, and we actually have the same slides," Traynor said.
Like Lutts, Traynor is upbeat about the U.S. economy's ability to adapt.
"There is a dynamism that exists in the U.S. economy that doesn't exist anywhere else in the world," said Traynor, who forecast moderate growth in the United States in 2012.
During the question-and-answer session, Brian Cranney, president of Cranney Companies in Danvers, provoked laughs when he asked Lutts and Traynor to pick a stock they thought would double over the next year.
Lutts joked that Cranney was aiming too low in his expected returns, then picked a company called New Oriental Education and Technology Group (EDU), which provides English and private educational instruction in China.
"I'm not sure it will double over the next 12 months, but it should do very well," Lutts said.
Traynor suggested DFS, Discover Financial Services, as consumer spending seems to be picking up.
The event was hosted by the North Shore Chamber of Commerce at the CoCo Key Hotel in Danvers.
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