On November 30, Switzerland’s citizens will cast a very critical vote.
Through a referendum, they will vote for or against the Swiss National Bank increasing its gold bullion reserves to 20%, the central bank halting the selling of gold, and the storing of gold bullion in the country. (Source: Kitco News, September 30, 2014.)
If the results are in favor of the referendum, it will mean Switzerland’s central bank will be forced to buy a significant amount of gold bullion.
According to the most recent data from the World Gold Council, Switzerland has 1,040 tonnes of gold bullion in its reserves, equal to only 7.8% of its total reserves. (Source: “World Official Gold Holdings,” World Gold Council web site, last accessed October 16, 2014.) To bring its gold bullion holdings to 20% of total reserves, the central bank of Switzerland will have to buy 1,600 more tonnes of gold, or about 60% of all global mine output this year. Will the gold market be able to handle this kind of demand shock? I highly doubt it.
And if the central bank of Switzerland stops selling gold, a significant amount of gold will come off the market.
Finally, the vote on gold being stored in the country is just another example of the increasing appetite for the precious metal. We saw this phenomenon happen in Germany not too long ago when the country asked the U.S. for its gold back (the U.S. was “storing” it), but Germany was told it would have to wait seven years to get it.
The big picture: Since 2009, central banks around the world have bought more gold bullion than they have sold. Bring in consumer demand for gold bullion from China and India, and the recent lower gold bullion prices have provided buyers another opportunity to buy gold on the cheap.
If the referendum in Switzerland goes in favor of the country going back to the gold standard (that’s essentially what the vote is about), and other factors come into play in th… Read More
Even with the recent price retrenchment, there’s not a lot of value circulating in this stock market. Everything’s already gone up and the capital gains have been great the last few years. But it’s still a slow-growth environment in the global economy, and despite a very accommodative monetary policy, stocks can’t go up forever without experiencing a meaningful retrenchment.
Company earnings are pouring in and there have been some disappointments. But for a lot of mature large-cap businesses, this is a reflection of their industries’ cycles. Large companies in mature industries don’t grow by very much more than the low single-digits.
Which is why a company’s dividends are so important in a stock market that’s at a high but offering little value.
It’s difficult to imagine stocks this year serving up double-digit returns on the back of 2013’s standout performance.
And investor sentiment has changed, too, with oil prices being the catalyst for the recent “deflation worry” sell-off. (See “Is This Stock Sell-Off Just a Blip?”)
The stock market’s existing winners are the way to go going into 2015. There’s plenty of cash in company coffers for more dividends and more share repurchases. It’s a formula that’s worked for large corporations over the last several years, and there’s no reason why it won’t keep working in a slow-growth environment.
Texas Instruments Incorporated (TXN) had a good quarter. The company beat Wall Street consensus, producing substantial double-digit gains in comparable earnings on eight-percent year-over-year revenue growth.
Texas Instruments achieved a new record in gross margin as both analog and embedded processors (which comprise just over 80% of the company’s total sales) sold well, and manufacturing efficiencies went right to the bottom line.
During the third quarter, Texas Instruments boosted … Read More
The financial media and analysts are talking endlessly about the state and fragility of the stock market and whether a bottom may be near. I discussed the vulnerability to the downside in my last article. If you missed it, you may want to go back and read what I said. (See “Strategies to Protect Your Capital While Investing in This Market.”)
While stocks appear to be heading to negative ground in 2014, I view continued weakness as a buying opportunity to accumulate some stocks at a discount.
For the majority of you, I would advise staying away from the higher-beta small-cap and momentum stocks at this time and wait for things to settle down. In other words, I want to see some sustained buying support emerge to show some evidence the downside selling is coming to an end.
In the meantime, take a look at some of the bigger S&P 500 and DOW stocks that have moved lower to much more attractive entry points.
In the technology area, I like what’s happening at former Wall Street darling Microsoft Corporation (NASDAQ/MSFT) under the stewardship of CEO Satya Nadella.
While Nadella recently said some disparaging remarks on females in the workforce, what he has done at Microsoft since taking over from former CEO Steve Ballmer has been encouraging.
The rise in the stock price in Microsoft has even allowed Ballmer to pay an obscene $2.0-billon-plus for the LA Clippers. Ballmer’s failure to recognize and fully understand the big impact the mobile sector has on the technology space helped to make Microsoft insignificant for years.
Chart courtesy of www.StockCharts.com
Nadella has shifted his focus to make Microsoft a much more relevant company for the technological age we are in. While the company is known for its “Windows” platform, Microsoft is looking to develop solutions for the mobile space.
The personal computer (PC) is not dead yet, but Microsoft has shifted its focus to smartphone… Read More
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