Wednesday, March 14, 2012

War With Iran:What To Expect-and what to do

President Barack Obama warned Iran Wednesday that the time left for a diplomatic solution is shrinking.Investors are contemplating just what to expect and how to respond if war indeed breaks out.Aaron Gurwitz,Chief Investment Officer at Barclays Wealth,says the problem is,this is an unknown unknown.I don't know how to assess the chances of a war.
In an attack on Iran,the price of oil would probably rise very sharply.It would be very hard to get oil to customers.Expect 150-200 dollar a barrel oil if the Strait of Hormuz is closed.
It would be a huge impact on markets and the global economy.Risk assets such as equities and junk bonds would be sold.We at Barclays don't want to go into cash now.You might want to buy the VXX as volatility would spike,or an oil etf.
I worry about it as a citizen and an investment strategist.You hear people talking about starting a war in a very sensitive region.Those who would lose sleep should probably put something in their portfolio,Mr.Gurwitz counseled.
Barclays PLC ADR(BCS)
Some possibilities for the situation researched by this blog include:
iPath S&P GSCI Crude Oil Total Return(OIL)
iPath S&P 500 VIX Short-Term Futures ETN(VXX)
iPath S&P 500 VIX Mid-Term Futures ETN(VXZ)
It is generally unwise to concentrate too much in any one asset.Also bear in mind that VXX is more volatile than VXZ.None of the notes above pay dividends or interest.
For less experienced investors,allocating more to the bond and cash portions of their portfolios would seem the safest course in difficult times.Some of the most popular bond funds are:
iShares Barclays Aggregate Bond Fund(AGG)
Vanguard Total Bond Market ETF(BND)

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