Where I See the Best Value
in the Market Today
Friday, July 29th, 2011
By Michael Lombardi, MBA for Profit Confidential
Today’s commentary is directed to: (1) my readers who have not invested in gold; and (2) my readers who have invested in gold—yes, all my readers.
First, to my gold bug followers…
The price of gold bullion continues to hit new highs. But the price of gold-mining stocks continues to lag the market. Why?
When we look at the major gold mining companies, which are coincidently the ones our analysts follow, we see that Barrick Gold Corporation (NYSE/ABX) is down 17% from its 52-week high. Goldcorp Inc. (NYSE/GG) is down 12% from its high. And Newmont Mining Corporation (NYSE/NEM) is down 13% from its 52-week high. Why?
My answer lies in the fact that investors and market do not believe the price of gold will sustain itself at these high levels. There is plenty of suspicion over record-high gold prices, as evidenced in news stories like, “In a Gold Lovefest, Shades of 1980” (New York Times, 07/24/11).
Now to my readers who have not dipped into the major gold-mining stocks yet…
It’s my belief that the stocks of major gold producers offer the best value in the market today. These stocks are down an average of 14% to 15% despite record gold bullion prices. We could have “catch-up” time for the major gold producer stocks at any time. And I believe that, by the time the bull market in gold is over, it will be the gold stocks leading the rally, not bullion.
My opinion is simple, even basic. After years of excess money printing, the greenback is declining against other major world currencies. In fact, the U.S. dollar has been spiraling down in value since late 2008, early 2009.
But it’s not just too much of a currency in the system that causes its value to decline. The country behind the greenback is awash in debt. Its economy is hurting, leaning more toward another recession than toward growth. And all that money printing could lead to unexpected inflation.
If you have the same fears I have, dear reader, the best stock market advice I can give is to take a serious look at the stocks of the major gold producers. They are where I see the best value in the market today.
Where the Market Stands; Where it’s Headed:
Sure, there’s a lot of volatility in the market. The media and analysts are making a mountain out of a mole hill with debt-ceiling nonsense. The stock market seems to lack direction. But my opinion hasn’t changed.
We are in a bear market rally that was born on March 9, 2009. That bear market rally, while “tired in the tooth,” as they say, still has more room to move on the upside. Yes, the risks outweigh the possible rewards, but stocks will have a final blow-off to higher prices before the bear market retires.
What He Said:
“When I look around today, I see falling stock prices…I see falling house prices…and prices for retail goods declining. The media has it all wrong blaming (worrying about) inflation. In my opinion, the single biggest threat to the U.S.economy and to the Fed in 2008 is deflation. You can bet the Fed will expand the money supply and drop interest rates aggressively as deflation starts to rear its ugly head.” Michael Lombardi in PROFIT CONFIDENTIAL, December 17, 2007. Michael was one of the first to warn of deflation. By late 2008, world economies were embedded in their worst state of deflation since the Great Depression.
Next Post: An Early Obituary for the EuroPrevious Post: Trading Action Repeating Itself—What
the Stock Market’s Setting Itself up for
Tags: best stock advice, best value in the market today, bull market in gold, gold mining stocks, gold producer stocks, gold shares, Gold stocks Market, Goldcorp Inc., inflation, price of gold bullion, U.S. dollar
Tweet
Sign Up for PROFIT CONFIDENTIAL and
receive a FREE copy of our exclusive report:
"A GOLDEN OPPORTUNITY FOR STOCK MARKET INVESTORS"
We respect your privacy and
will never share your e-mail address.
Michael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Today, Michael only employs the top market analysts and editors. Some of our recommendations have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Along the way to building Lombardi Publishing Corporation, now with over one million customers in 141 countries, Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland.Follow Michael and the latest from Profit Confidential on Twitter
