Gold & Precious Metals
In a moment, I’m going to tell you about the recent action in gold and silver, what it means, and some surprising conclusions.
But first, you need to know more about the cycles of war that I’ve been telling you about, how they are ramping up so quickly, and more specifically, about Putin.
First, let’s take a look at the war cycles. In early 2013, over a year ago, I warned everyone that the war cycles were set to explode higher, on the backbone of bankrupt Western economies.
It’s a fait accompli. War and bankrupt economies go hand in hand. When desperate, like the governments of the United States and Europe are now, strange things start to happen.
You only need look at the historical record. The collapse of Rome was accompanied by many different civil rebellions and international conflicts.
Ditto for the Ottoman Empire. The British Empire, when it fell on desperate times. For Spain. For Germany.
For every major economic power throughout history, when governments became bankrupt and desperate for cash, they imploded by attacking others and their very own citizens, through sleight-of-hand tax increases, through confiscatory policies that first racked everyone’s money, then confiscated it, through loss of civil liberties, through propaganda and more, lots more.
Weakened, they lash out. They prepare to rally the people, they look for distractions, reasons to spend even more money, all with the aim of consolidating the national psyche.
This is what the United States is doing now. Russia is doing the same thing. Putin is rallying the national psyche. The Russian economy, weakened internally by corruption, by alcoholism, by declining revenues from the three-year bear market in commodities, is not in much better shape than Europe or the United States.
So the battlefield is now prepped. Russia versus the West. Russia versus Europe and the United States.
And it is now entering a new, more dangerous phase. Military conflict is almost always preceded by economic warfare. And Putin is about to pull the trigger and respond to sanctions against Russia with his own sanctions against the West.
[Editor’s note: As the Iraq and Afghanistan wars wind down, a series of new civil and regional wars are about to EXPLODE overseas. Find out in Larry’s FREE report, Rumors of War, the key sectors that will see MASSIVE profits as foreign investors flee overseas markets in panic.]
Billions of dollars in foreign investment in some of the world’s biggest untapped oil reserves are at risk. Exxon Mobil Corp. (XOM), for instance, has drilling rights to 11.4 million net acres (46,134 square kilometers) in Russia, the company’s biggest single cache of drilling rights outside the United States.
Other major companies with big investments in Russia include Royal Dutch Shell Plc (RDS-A), PepsiCo Inc. (PEP) and Alcoa (AA). Then there are a slew of medium- and large-sized companies from the West that are also at risk of getting hit by Putin.
U.K companies are most worried about their financial services in Russia. France is worried about military sales and luxury goods. Germany has the biggest trade with Russia. And Switzerland and Germany also have the biggest banking and loan exposure to Russia.
At the same time …
Russia is hemorrhaging from capital outflows, a record $60 billion in Q1 alone.
Savvy Russian investors want out. They’re not about to sit around and see their capital get caught up in an economic war, probably followed by military conflict.
So they’re moving their money. Europeans are moving money out of Europe as well. Which leads me to my next point …
During not-so-normal times like we have today, the flow of capital is what determines major market moves.
Not supply/demand fundamentals. Not GDP, inflation, central bank policies.
Not even price-to-earnings ratios, or corporate balance sheets or anything most analysts use to predict market movements.
It’s capital flows, from one nation to another, from one stock market to another, from one savvy investor’s pockets to any investment that can help that investor get their money to safety, off the grid to a market that is liquid, that offers a decent chance at some type of return, and where preservation of capital is also of utmost importance.
$60 billion coming out of Russia in Q1 may not seem like a lot, but when I look at the war cycles and how they ramp up for six more years …
When I consider how quickly they are ramping up only two years into the process …
And I consider the miserable shape that Europe is in …
I am more confident than ever before that my forecasts are on track and that …
First, we will soon see gold and silver take off like a bat out of hell.
Second, we will soon see the U.S. equity markets soar to one new record high after another (after a correction is complete).
Third, we will soon see the next wave down in the prices of sovereign bonds in Europe and the Unites States …
And the next wave higher in interest rates …
With all of this likely to happen in the face of a rising dollar, falling foreign currencies …
While the majority of analysts and investors are caught flat-footed, on the wrong side of the markets.
Right now, gold and silver are still on the cusp of a major new bull market, one that could end up even more powerful than even I originally expected.
Chief reason: This past week’s market action. Silver made a new low, taking out its December low, while gold remains nearly $100 above its equivalent December low.
This is what is called a “bearish non-confirmation” — a technical term that describes a situation when two related markets behave differently at an important low, where one market makes a new low and the other doesn’t.
And typically, it is extremely bullish.
Only time will tell, but right now, the patterns I see emerging in gold and silver tell me that …
- Gold and silver are about to take off to the upside. Or …
- We have one more final low coming for both, a short swift downdraft …
But one that will merely compress the springs all that much tighter and lead to an explosive rally immediately thereafter.
So just like the battlefield has been prepped between Russia and the West, the war cycles are now dominating the action in gold and silver …
And they will soon create an explosive rally in the precious metals, the likes of which we have not seen in a very, very long time.
It’s now not so much a matter of time, but of price level. Will gold take off from here, or slightly lower levels?
Either way, we are now merely a few yards away from the time when I will scream from the rooftops “Backup the truck now in gold and silver!”
If there is one thing you do the rest of this year to help insure you protect and grow your money, it is this:
Stay tuned in, very tuned in, to all of my writings.
If you do not, you may miss the most explosive turnaround to the upside — ever — in gold and silver.
Best wishes,
Larry
Following last week’s show we received a ton of requests for more information on income producing investments from Desjardin portfolio strategist Steve Deschesnes.
So Mike has asked Steve to put on a short, live webinar immediately following this week’s show with more recommendations from his Canadian High Income portfolio. Anyone can join but we are restricted to a maximum of 1000 registrants.
CLICK HERE to join or paste the url below into you browser. You can register anytime after 9am Sat May 10th.
https://disnatevents.webex.com/disnatevents/onstage/g.php?d=665109379&t=a
- Topic: High Income Canadian Securities
- Date and Time: Saturday, May 10, 2014 10:05 am Pacific
Let’s just put this right up front: We’re seeing more pressure on American portfolios now than we’ve seen in the last few years.
Instead of rising steadily like it did in 2012 and 2013, the stock market is now struggling.
Instead of keeping pace or beating the major averages, like the Dow Industrials or S&P 500, the average stock is lagging. Heck, the much broader Russell 2000 Index just cracked its 200-day moving average and is trading roughly where it did seven months ago.
The dollar can’t seem to catch a break, precious metals are just treading water, and interest rates have been slumping rather than rising, as I and just about every other analyst and investor were expecting. All in all, that means it’s been much harder to make money as an individual investor.
But not impossible, mind you. No, what you need to do to beat the portfolio heat in this environment is to zero in like a laser on what is working — the stocks rated the highest by an independent rating agency with no axe to grind.
But even that’s not enough. You have to go a step further and weed out those stuck in loser sectors with no momentum or strong fundamentals, those with excessive interest rate exposure, and those that are just sitting there like a pet rock.
You also want to focus strongly on companies that are paying you — the investor — back! I’m talking about those with proactive managements that are paying out generous dividends, buying back stock aggressively, or otherwise reorganizing their companies to be leaner, meaner, and more focused on building value for you!
That’s what I spent several recent weeks focusing on, and the result is my new special report, “Six Mega Market Winners for 2014 — and Beyond!“
These are companies that fit the general outline I spelled out earlier. One of them is a master limited partnership (MLP) that’s expanding its network of storage terminals and pipelines in order to better serve the booming domestic energy industry. Instead of treading water, this stock is making new record highs every day. But I don’t think this move is over at all, given the growth potential that lies before it.
Another is a packaging company that yields 37 percent more than the average S&P 500 stock. It spent the past year restructuring its business to dump some dead real estate weight. That freed up money for shareholder-friendly actions — including a large special dividend earlier this year.
Its shares flirted with an all-time high in just the past few days. But considering all the things it has going for it, I believe this company has more room to run.
In other words, there ARE stocks that offer consistent, growing profits, and better yields than you can get in either the S&P 500 or the government bond market. I’ve highlighted some favorite sectors, like domestic energy and aerospace before. And in this new report, I give you some of my favorite names within those sectors — and more.
If you’re interested in checking out “Six Mega Market Winners for 2014 — and Beyond!” all you have to do is click here. Or give us a call at: 1-800-291-8545 and we’ll get you taken care of right away! These are some of my best ideas for taking the heat off your portfolio in a year that’s proving a lot tougher than the last few!
Until next time,
Mike
Not much to report from the markets. The Dow up a bit. The Nasdaq down a bit. Gold flat. Twitter got slammed again. Shares in the online “self-expression platform” are down about 50% so far this year.
Your editor believes he recommended you sell high-flying tech stocks. If he didn’t, he should have. But he does not usually make investment recommendations. He does not do investment analysis. He does not often invest.
Instead, he waits. And waits. And waits – until a bargain screams so loudly in his ear it threatens his hearing.
But even at that moment, he hesitates. When something is so cheap it appears to be a “once-in-a-lifetime opportunity” his feet grow cold.
What’s wrong with it, he wonders? If it’s so cheap, there must be a reason. What do all those people who don’t want it know that he doesn’t? Blood in the streets doesn’t bother him; but what if the next blood trickling down the gutter is his own!
Then he is delayed and disturbed by the philosophic implications. If there had really been a dollar bill lying on the sidewalk in front of him, surely someone would have picked it up? And if someone had picked it up… it couldn’t still be there, could it? Well then, it isn’t there, no matter what his eyes tell him.
But what do skittish, panic-prone markets do… except wig out from time to time? And what good are they if coldblooded and steel-nerved investors can’t take advantage of them? And how would they ever get back to normal if all investors took temporary madness as proof of permanent impairment?
A Mother’s Day Gift
Assuming the market anomaly is still with us by the time this cranial indigestion has passed, we are ready to act. And you, dear reader, are the beneficiary. For today, we give you a recommendation…
After all, it is Mother’s Day on Sunday. Perhaps Mr. Market is feeling flush with filial fondness for dear ol’ mom. Here he comes… his hands forward and a bright red bow wrapped around his precious gift.
What is it? Gazprom!
We are talking about Russia… and specifically about a gift that keeps on giving. Gazprom controls more than 15% of global gas production and reserves. And we expect it is going to be selling that gas for a long, long time.
Gazprom (which you can buy on the Pink Sheets in the US under ticker symbol OGZPY) has a return on equity of about 13%… and a net profit margin of nearly 30%. By comparison, ExxonMobil has an ROE of 18% and a net profit margin only half as high.
According to data from Reuters, you can buy ExxonMobil for 13.8 times its 12-month “as reported” earnings. And you can buy Gazprom for just 2.7 times its 12-month “as reported” earnings.
By this measure, a dollar’s worth of earnings from the US oil major will cost you $13.80. But each dollar of Gazprom’s earnings will cost you just $2.70.
Slow Burner
Does this mean you should expect the share price of Gazprom to go up any time soon?
Nope.
For all we know, the entire Russian army stands amassed on the border of Ukraine, and every valve capable of delivering Russian gas to Europe has a pair of hands on it, determined to shut it off.
Another fact recorded in the book we can’t seem to find, is that next year an inventor will discover a marvelous way to power the world on water – making gas obsolete. And the year after, a report from the FDA will tell us that Russian gas causes people to gain weight – another devastating blow to Gazprom.
All we know is that some things are expensive and other things are cheap; and Gazprom looks more down than up. Of course, we spend our investment lives looking for assets that are absurdly cheap; when we come face to face with one, we don’t want to duck.
Regards,
Bill
Further Reading: Buying “when there’s blood in the streets” is just one of the strategies the ultra wealthy use to grow their wealth. To find out what other strategies they use, Bill’s son Will recently “infiltrated” a meeting of a very elite group of wealthy families in London… in the city’s oldest gentlemen’s club. The secrets Will discovered could help you cross what he calls the “invisible barrier” to wealth. Read on here to find out what Will discovered – and how it could transform your financial situation.
Market Insight:
Crunching Gazprom’s Numbers
From the desk of Chris Hunter, Editor-in-Chief, Bonner & Partners
There are as many phony contrarians out there as there are phony Elvises.
Everyone is a contrarian, until a market panic rears its ugly head. Then most “contrarians” head for the hills along with the stampeding crowd.
Nevertheless, if you can zig when other investors zag, you have a fighting chance of making some real money in the markets.
One of the most well-thumbed books on my desk is Contrarian Investment Strategies: The Next Generation, by famed contrarian investor David Dreman, the founder and chairman of Dreman Value Management and a former senior editor of value-based research firm Value Line.
According to Dreman,
One of the most obvious and consistent variables that can be harnessed into a workable investment strategy is the continuous overreaction of man himself to companies he considers to have excellent or mundane prospects.
And he offers a related investment rule:
Buy solid companies currently out of favor, as measured by their price-to-earnings, price-to-cash flow or price-to-book value ratios, or by their high yields.
Let’s look at how some of those value ratios stack up for Gazprom, using figures from Morningstar…
As Bill reports, Gazprom trades on a trailing price-to-earnings ratio of 2.7. This compares to an industry average of 13.1. That’s a 79% discount to the industry average.
The company, meanwhile, has a price-to-book of 0.3, versus an industry average of 1.5. That’s an 80% discount to the industry average.
And Gazprom yields 5%, versus an industry average of 3.3%. That’s a yield 51% higher than the industry average.
Of course, Gazprom is Russian. It’s run by cronies of swaggering Russian president and former KGB man Vladimir Putin. And Putin is not shy about using Gazprom as an economic weapon in the Russia-Ukraine conflict.
But remember: Stocks are cheap because there is fear over their futures. And try as you might, you don’t find bargains without high levels of fear and negative sentiment.
So, you have a choice: Run away along with the investment crowd. Or recognize the value on offer and buy.
One important caveat: As Bill mentioned, this isn’t a good investment if you are hoping to make a fast buck. It could take many years for sentiment to turn positive toward the Russian stock market… and many years for Gazprom’s P/E multiple to expand.
But even if Gazprom’s price-to-earnings ratio moves back inline with its five-year average of 3.8, presuming earnings per share stay consistent, that represents a 46% profit from current levels.
Is this a comfortable investment?
Absolutely not. But at Bonner & Partners we see that as a good sign, not a bad one.
Each week at Canada Stock Channel, we screen through our coverage universe of dividend paying Canadian stocks, and we look at a variety of data — dividend yield, book value, quarterly earnings — and compare it to the stock’s trading data to come up with certain calculations about profitability and about the stock’s valuation (whether we think it looks ”cheap” or ”expensive”).
History has shown that the bulk of the stock market’s returns are delivered by dividends, and so we pay special attention to dividend history. And of course, only consistently profitable companies can afford to keep paying dividends, so profitability is of critical importance. Dividend investors should be most interested in researching the strongest most profitable companies, that also happen to be trading at an attractive valuation — maybe there is a company-specific reason causing the stock to be ”cheap” or maybe the entire sector is taking a hit, but whatever the reason, we think there is great value in ranking our coverage universe weekly using our proprietary DividendRank formula, and sharing the top stocks with our subscribers, neatly divided into 17 sectors/categories.
These are the three stocks in each category that our DividendRank system has identified as the top most ”interesting” … this is meant purely as a research tool to generate ideas that merit further research.
**….click HERE to see the top 3 Dividend Paying Companies in each of 15 Business Sectors. The screenshot below shows how each sector is presented. On this screenshot below the individual links are not active, so click HERE or on the image below to see all 15 sectors presented as below, but with active individual links – Editor Money Talks.
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