Beyond Gold: 6 Overlooked Alternative Investments

With gold at a record high, these investments may shine.

July 20, 2010, 7:49 PM

Oct. 4, 2010— -- There are those who will tell you that gold still has room to roam: that you ain't seen nothing yet. That even though an ounce right now tops $1,300, you should hock your kids to buy some.

At least, that's the advice of Dan Oliver and Dan Mahony, who think gold could peak at over $10,000. The two Dans follow the gold market.

"Gold is hardly over-owned," Mahony says. "All the gold in the world, at today's prices, is only worth eight-tenths of a percent of financial assets, versus nearly 5 percent in the 1960s.

"If you adjust gold's price for increases in the money supply -- which the Fed keeps raising -- gold is actually near its all-time low," Oliver says.

Be that as it may, if you're skeptical and feel you can't afford to buy in now, here are other opportunities you might consider:

If you own land with oil shale on it, you're in luck. Shale deposits cover North Dakota, much of Montana and parts of Colorado, Kansas, Nebraska and Wyoming.

In late September, the value of shale oil leases leaped, following announcement of a new process that makes oil extraction more economical.

Before this discovery, extraction was profitable only when oil was trading at $70 a barrel or higher. (Right now it's at about $80.) The new technique drops the threshold to $50. Mineral leases that would have sold two years ago for $10 an acre now are selling for $5,900, according to industry consultants Wood Mackenzie.

The value of oil shale may increase further as the extraction process becomes even more efficient.

"Will there be further advancements? Absolutely," says Harold Hamm, chief executive of Continental Resources, one of the developers.

"Real men don't buy gold," argues writer Joe Eqcome, who dismisses gold as a "pantywaist" investment. The reason? If civilization truly falls apart, the things of value will be the basics: food, potable water, clean air, energy, guns and ammunition. His Survivor Index compares gold's performance to a composite average of the stocks for seven companies making stuff survivalists will want to have--canned food (Ball Corp); air (Airgas); potable water (Dr. Pepper); guns (Smith & Wesson); and energy (Cummins). Since 2000 the Index has outperformed gold handsomely.

Will Rogers famously said it: They're not making any more land. In fact, they're making less: The world's supply is being eaten up by the growth of cities, by erosion, and by drought. According to Insight Investment, the planet's amount of arable land per person has been reduced in the past 40 years by half. Yet investor interest in farmland remains low. This, despite the fact that farmland arguably is undervalued in the U.S.-- cheaper than it is in Europe and more on a par with the price of farmland in the developing world. Like gold, land has served historically as a hedge against inflation. But land, right now, is the cheaper buy.

If you found yourself needing to look up the word "annuity," then this may not be the strategy for you. An annuity is a contract, usually between the holder and an insurance company, that makes payments to the holder at regular intervals. A Swiss annuity is one issued by a Swiss life insurance company and pegged to the Swiss Franc--one of the few currencies left in the world that is backed, even partially, by gold.

At one time the Swiss Franc was backed 100 percent by gold, says Dr. Donald Moine, co-author with Dr. William McCord of the book "Better than Gold: An Investor's Guide to Swiss Annuities." Today, says Moine, "It's still largely backed."

The buyer of a Swiss annuity is betting on two things: the enduring value of gold and the ability of a Swiss institution to make payments. Switzerland has long been famous for its politically stability and financial probity. "Under Swiss law," says Moine, "the government cannot run a deficit." The country has stayed out of wars. Its citizenry is hard-working and sober.

Why not just buy Swiss francs? Because owning an annuity anchored to the franc has advantages. These include privacy, safety and liquidity. Moine says that under Swiss law Swiss annuities are protected from all judgments, claims by creditors and bankruptcy decisions. Where the holder of a U.S. annuity cannot borrow against it, the holder of a Swiss one can. For what kind of investor might a Swiss annuity a bad idea? "Anyone who wants a short term investment that will rapidly increase in value," says Moine. "Swiss annuities are designed for the long term."

Got a pick? Got a shovel? Nobody's stopping you from going right out and getting your own gold. By so doing you'll eliminate the middle man and greatly reduce your cost of acquisition. It's hard to say no, after all, to gold whose acquisition cost was zero.

Well, maybe not zero -- but almost. Your total outlay to get started in placer mining (where you take rocks and dirt from a stream and swirl them in a pan until the gold settles out) can be under $25, according to Hoss Bundy, owner of Action Mining Supplies in Smartsville, Calif.

He himself has been mining for 25 years. How well can an amateur do?

"I paid my house payment for 12 years with this," he says, "but that's when I was mining three or four days a week. I was getting sometimes two ounces a week, back when gold was $350 or $400 an ounce. It's back-breaking work, but if you're serious about it, there's a lot of money to be made."

Since opening his store, he's not been able to devote as much time to panning.

"Now I do about half an ounce a day, on average," he said, but added that he's got customers who get $400 or $500 a day.

Laws on what kind of mining is permitted where vary state to state. California's are particularly restrictive. Make sure you know the rules before laying out any cash.

Ice hockey ranks high among the fastest-growing women's sports. By some estimates, the number of participants worldwide has increased 350 percent in the past 10 years. Growth has been especially brisk in North America, Canada particularly. Players are required to wear certain pieces of equipment not required of their male counterparts, including a protective full-face mask, thus creating, in the opinion of the U.S. Department of Commerce, a golden opportunity for equipment manufacturers and retailers.

Be warned, however: Past women's hockey speculators have suffered. Gary Waller of Toronto says that 15 years ago, during an early phase of the boom, he wrote an insurance policy for a store whose distinction was that it sold hockey equipment to women only. The store's male owner, Waller says, had expected to cash in. Growth did not materialize soon enough, and the store failed--a chilling testament to the folly of trying to time women's hockey.

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