With all the volatility in the markets this past week and my absence from the office, I thought I write a short update on the markets and model portfolio. Hopefully with it and the special update with George on Thursday, you will know my latest thoughts.
U.S. Stock Market – On a very short-term basis, it’s oversold and due for a bounce. The close Friday suggests that’s a good likelihood as of this writing. While you can never ever say the “Don’t Worry, Be Happy” people are done, one should be out of long positions except those related to metals. Long equity positions outside of the U.S. are at a minimum, the lesser of two evils. If for some reason the “Happy” people can muster one more run to new recovery highs, I don’t believe such a rise would be higher enough to justify playing from the long side here.
I can’t emphasize enough that I’m quite negative on the U.S. economy and equity market for years to come. Again for the umpteen time, I believe it should mirror the Japanese economy and market of the last 20 years.
Precious Metals – Many forget that platinum and palladium are precious metals along with gold and silver. They’re both fairly priced. The same can’t be said for gold and silver.
Gold – If a picture is worth a thousand words, than I don’t need to say much about the long-term direction of gold. Back in 2004, 2006 and 2008, many were calling a top in gold. While there was a correction, gold eventually went to much higher levels. Such shall be the case IMHO. In fact, I believe we shall look back at this period and conclude it turned out to be the last great buying opportunity for quite some time. Yes, arguably one could make a case for another $100 down given the recent technical sell-off. But given the selling has been limited to the paper market on the Crimenex (Comex) and the reversal seen late Friday both in gold and gold shares, I think the chances of a substantial fall from here are remote.
Silver – The “Rodney Dangerfield” of precious metals. The concentrated short positions on the Crimenex are ridiculous. Like it or not, it plays “second fiddle” to gold and while it can briefly lead, gold remains the big brother. Like gold, downside from here appears very limited.
Base Metals – The serious correction in copper and zinc has led me to feel they’re no longer fully priced and to remove my suggestion to overweight in precious metals. I think both precious and base metals are now equally weighted. But unlike gold and silver, I think base metals rallies are likely to be limited to their previous highs because economies worldwide are net not strong enough to warrant higher levels.
U.S. Dollar – I continue to believe this bear market rally can get to the 83-84 area basis the U.S. Dollar Index. But make no mistake about it, longer term we should see new lows on the dollar.
U.S. Bonds – I think this article says it all as far as I’m concern. (Ed Note: Article titled ‘Every Human’ Should Short U.S. Treasuries)
Oil and Gas – I’ve begun to look at oil again possibly from the long side if we get into the $60s and the dollar gets to the 83-84 area so stay tuned. Pass on gas (pun?).
Select Model Portfolio Comments
I would like to put FXE and FXC back on the buy list if the Euro gets below $1.35 and the Loonie $.90
More good news on Prosperity continues to support TGB as a buy under $4.50. The financing on Nevsun should remove most of the fears that came from the U.N. sanctions against Eritrea. Both NSU and Sunridge Gold hosted an analyst’s tour. Unless news gets worst regarding Eritrea, SGC should see better days ahead.
Given the latest results on Evolving Gold, the stock appears the cheapest since I first became involved with it. There’s a teleconference on Tuesday.
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