Traditional equity portfolios won’t make substantial money in the next decade, says Larry Grossman in The Sovereign Society. And the US bond market has been ranked first globally only once in the last ten years. Investment-grade foreign bonds have higher yields than the US equivalents and stand to make more capital gains…

I’ve always been very bullish on the marketplace in general, but now I’m honestly starting to question what’s going on. Somehow, I don’t think most analysts and economists are getting the bigger picture in the grand scheme of things.

Let me tell you what really shook me up:

I read recently that the Japanese stock market peaked at around 36,000 nearly 20 years ago. Now it’s half that. Okay, most of us know that fact, but how many of us have considered the effects a similar event would have on our markets?

… So what if the Dow peaked at 14,000 a year ago, and it simply meanders between 10,000 and 12,000 for the next five years or 10 years? Who’s making any money there?

Let’s go back to 1999. If you remember, every person and their cousin owned and bragged about Cisco as a major stock holding in their portfolio. Considering all stock splits, it went from around US$2 in 1990 to around US$100 in 2000. But when the tech bubble popped, it plummeted to below 20 and has been trading in the low 20s for eight years now.

If we looked back even further to the early 70s, we were mired in an unpopular war and the stock market meandered for years and years.

Now ask yourself: Can I afford that kind of waiting period, were the same to happen to stocks in my current portfolio?

I can’t tell you how many brokerage statements I’ve seen from my clients lately, showing how they’ve been knocked back five years because of what’s been going on.

Now is the time to aggressively explore alternative strategies, before more long-term gains are wiped out by the market’s decline.

Seeking Shelter from the Storm: Global Investment Provides Opportunities in Any Kind of Weather

Did you know that the U.S. bond market ranked first only once over the past 10 years?

Many other countries posted double-digit returns on their bonds in the same period. For instance, Norway paid 40% in 2002, Australian bonds made 37% in 2003, Poland offered investors 35% in 2004, and last year Canadian bonds took first place with returns of 23%.

These bonds outperformed for a number of reasons: Higher yields than in the U.S., falling yields in their home countries, generating capital gains; and appreciation of the foreign currencies against the dollar.

Right now, you can still find these kinds of opportunities abroad – as many economies slow and as the long-term prospects for the dollar remain bleak.

So it’s up to you. Ask yourself if you have the time to wait out a five or ten year down trend in traditional equity portfolios. Or if you’re prepared to diversify your portfolio with income and the potential for capital gains and exchange rate appreciation with select, investment-grade foreign bonds.

Source: Your Wake-Up Call