Personal Finance
“This week we will review the market conditions and what stock market bulls should be somewhat cautious of at this juncture” – Lance Roberts
More Good News – Economy WeakerThis past week was filled with more good news for “drug addicted” stock market bulls as a slate of economic data came in much weaker than expected. As I discussed last week, the “bad news is good news” mantra continues to push asset prices as weaker economic data raises hopes that the Federal Reserve won’t pull the “punch bowl” away too soon.
This past week saw the Empire State Manufacturing index drop by 8 points to near contraction levels as the Philadelphia Fed Manufacturing Index plummeted by 15 points to a contraction level of -6.3. The housing market was battered as the NAHB homebuilders index collapsed by 10 points. Mortgage applications drop by 4% last week as is down 17% over the last year. Housing starts slid to just 880k (annual rate) from 1.04 million last month, and existing home sales missed expectations at 4.62 million down from 4.87 million last month.
While the Leading Economic Indicators rose by 0.3% in the latest month the internals were very weak. More importantly, the coincident to lagging ratio, which is like a book-to-bill for the economy, fell further into recessionary territory.
Of course, all of the weakness is being blamed on the weather. However, there are two points to be made here. In many cases the data was weakening well before the cold weather set. Secondly, the data is already “seasonally adjusted” to account for the normal tendency to have inclement weather during the winter months. It is interesting that nobody questioned the “better than expected” data over the last two years as the “seasonal adjustments” boosted the reported data sharply as unseasonably warm winter prevailed?
This week we will review the market conditions and what stock market bulls should be somewhat cautious of at this juncture.
>> Download This Weeks Issue HERE
About Lance Roberts
Lance Roberts is the General Partner & CEO of STA Wealth Management, Host of the “Streettalk Live” Daily Radio Show (streamed live at www.streettalklive.com), and Chief Editor of the X-Report and the Daily X-Change Blog.
Follow me on Twitter: @streettalklive
Jim Rogers is holding on to his gold position in anticipation of an inevitable market bubble and substantial gains. Safe as money in the bank? Not so says the self-made billionaire; the threat of pension fund and savings confiscation is just one more reason to add precious metals investments to a diversified portfolio.
Rick Rule, head of Sprott US Holdings says bear markets create bull markets, so it’s time for investors to put on their contrarian hats and buy precious metals. Capital scarcity for new resource companies is another contrarian sign indicating that gold and silver miners represent a solid investment for every portfolio.
Ed Note: Rick Rule starts at 7:34 of this radio show, and Rule’s recommendations begin at 30:50. Jim Rogers begins at the 36.00 minute mark.
Market Buzz – 13 Day Rally for the TSX Closes in on All Time Record
Ed Note: Scroll down for KeyStone’s analysis of stocks to buy. Be sure to focus on the risk category of each recommendation, which is spelled out by Ryan in each recommendation from Small-Cap, High Growth that can Produce Big Gains thru more conservative undervalued Dividend Paying Growth Opportunities.
The TSX index closed the week on Friday at 14,206 points capping off 13 straight days of gains. Not only is this a feat not seen since January 1985 but if the market posts another positive session on Monday, it will actually set an all-time record.
It will be interesting to see how the market reacts Monday and whether or not investors will pay any heed to the potential record setting event. Will we see unusual volume and price activity or nothing out of the ordinary at all? Ultimately, setting a record for consecutive days of gains is pretty much irrelevant to a fundamental investor and outright annoying to a value investor. But what this does say is that investor sentiment has been particularly positive in the recent weeks and perhaps we should be on guard for a little return to reality.
When we look at the Canadian market over the last 3 years, we have seen a pretty consistent pattern. Investor sentiment has been strong in the opening months of the calendar year. More often than not this is the case as interest in the stock market is generally strongest (although not always) between January and April/May. But in each of the last 3 years, we have seen a noticeable reversal in sentiment that runs from mid-Spring to well into the summer. Each of the last 3 years has born witness its own cause for the volatility it produced. In 2011, it was concerns about the U.S. economy, its fiscal situation and persistent unemployment. In 2012, the fear was centered on Europe, with the collapsing debt structures of the PIGS (Portugal, Italy, Greece, and Spain) and the possibility of the contagion crushing, what was a fragile recovery in North America and the rest of the world. Last year (which ended spectacularly strong), it was rising interest rates which while indicating that a global economic recovery was in motion, also hampered the market performance of a number of important defensive industries which had lead the market recovery from the trough of the crash and were perceived as shelters of safety. Whatever the reason, investors have been quick to flip the switch from extreme optimism to pessimism and back again without a moment to waste.
When we try to make sense of all this we should take to heart a very important fact. Investors who bought into the hype and sold into the fear have suffered whereas those that have remained level headed in the face of volatility have actually had a great ride over the past several years. Although 2013 generated double-digit returns, this has resoundingly been a stock pickers market since immediately after the crash of 2008 and we expect this to continue. We would never analyze the trading patterns from recent years to produce a seasonal investing strategy as the best-in-bread stocks do not necessarily follow these market fluctuations. But what we can gather from these patterns is that overall investor sentiment has been a horrible guide for anyone looking to time the market (unless you are a contrarian). Intelligent and successful investors will assess individual stocks based on their own merits, they will analyze fundamentals such as financial position, growth, earnings, and cash flow (or have a good advisor do it for them – www.keystocks.com) and will refrain from paying too high a price for a stock no matter how much they like the underlying company. If one absolutely must incorporate some kind of market based trading strategy then our advice would be to center it around this…. “Be Fearful When Others Are Greedy and Greedy When Others Are Fearful” (Warren Buffett).
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Ed Note: This analyst offers 3 options of Investing into the developing Silver Bull Market. From the safest risk wise of investing in Silver Bullion through Silver Coins, the more risky ETF’s, which are often leveraged and of course rely on the skill of the Fund Manager to time their purchases of Silver Bullion well.
Then their is the more risky though potentially profitable strategy of buying individual Silver Mining companies. In this vein you can purchase existing producers that offer less risk than do Junior Mining companies. Though if a Junior Mining company is successful in moving a property from an exploration property thru to a producing company, offer the greatest potential for profit. Juniors are also simply the riskiest share investment you can make in the Silver Market. If you want to study a Junior Mining opportunity, I would recommend that you look at this incredibly detailed analysis of a Junior Mining opportunity that owns the Largest Land Package in One of World’s the Best Gold Mining Jurisdictions, the historic Rouyn-Noranda Mining Camp. Click HERE to view this thorough analysis of a Junior opportunity. Extremely detailed, right through to the resumes of each of the principals and key geologists involved in the project.
Silver is rallying sharply this month, up about 14% in the last three weeks and blowing out of its old range. After it closed yesterday at $21.85, I’m confident we’ll see silver test $27 or even $30 by the end of this year.
And that will make a huge difference for undervalued silver producers.
There are three reasons silver is going higher, and some ways you can make money as it rallies.
1. Mom and Pop Are Loading Up
Silver bullion coin sales rose to a record high in 2013. Here’s a yearly chart of U.S. Silver Eagle sales…
The U.S. Mint sold 42.675 million American Eagle silver bullion coins in 2013. That is 26% more than 2012, and it’s a new single-year record for the most purchased since the U.S. Mint began producing the one-ounce silver coin in 1986.
And it’s not just the U.S. Mint that sold a lot of silver coins. Mints in Australia, Austria and Canada have seen booms in silver coin sales of 41% or more.
And the buying continues. Sales of American Eagles are on pace for another record year.
2. Silver ETFs Are Buying, Too
Selling of gold by ETFs was a huge weight on gold prices last year. But silver didn’t see a rush of selling by ETFs. The amount of ounces they held stayed flat.
And now the ETFs are adding to their holdings.
Through February 14 of this year, the major silver-backed ETF products held 631 million ounces. That’s up 100.9% from their holdings at the end 2008.
3. Industrial Demand Is Set to Soar
Industrial demand accounts for more than half of total demand for silver. Smartphones, flat-panel TVs, solar panels, chemical reagents – they all use silver.
My sources say industrial demand for silver could rise 6% in 2014 to a record 511 million ounces. And that’s not including demand for jewelry and other uses.
No Surge in Supply
All this, and yet output from the world’s largest silver producer, Mexico, should remain nearly unchanged this year. China is the world’s No. 2 silver producer, and it’s the same story there. Worldwide, production is only expected to rise slightly in 2014.
In fact, most of the new silver that comes on line isn’t from primary silver producers. Instead, it is as a byproduct of mining for other metals. That puts a lid on production, no matter what the demand.
Individual miners offer a potentially very profitable way to play a rally in precious metals. But be careful; miners can be volatile. Click HERE to view this an extremely thorough analysis of a Junior mining Opportunity.
If you’re investing in silver on your own, you may be better off sticking to funds like the iShares Silver Trust (NYSE: SLV) and the Sprott Physical Silver Trust (NYSE: PSLV).
Good investing,
Sean
Michael interviews a whole host of experts he has selected asking them the only question that matters this RRSP Season:
“What are they themselves doing for their retirement?
What specifically are they investing in for growth?
What are they investing in for yield?
What are they buying in all risk categories?
In the first half hour of the Feb 22nd Money Talks Show in Michael’s commentary looks at the sea change that started in the US and now is spreading World Wide. He also interviews the first of 7 guests he has chosen by interviewing Neil McIver, Director, Wealth Management & Portfolio Manager.
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The second hour of the Feb 22nd Money Talks show, Michael continues to interview a whole host of experts he has assembled asking them the critical question: What are they investing in?
Regular guests Ozzie & Victor who also spell out what they are investing in. Doubtless in Victor’s case you will be surprised. Mike’s Goofy wraps up today’s show.
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