Equities Market
The equities market, a public market, is the listing of shares of a company on an exchange. These shares then are available to all investors interested in buying a piece of the company. The stock exchanges regulate the listing of company shares by ensuring that the companies report all of their audited financial records for prospective investors to access. Investors then buy and sell shares, determining the value of the company based on the financial results and future prospects of the firm. Investors include the retail client (general public), mutual funds, hedge funds, corporations and other large institutions such as pension funds.
Is Gold’s Near-Death Crisis Over-Exaggerated? Concerns of a Market Meltdown May Not Be
By George Leong, B.Comm. for Profit Confidential
Commodity prices have been heading lower on the charts.
In fact, it has been an awful few days for gold as prices plummeted, failing to hold $1,500 an ounce.
Prices dove right through support at $1,400 to $1,385.62 on Monday—the lowest level since 2011.
The shiny yellow ore is in a bear market. Down 27% from its magical peak of $1,920 in September 2011, it has been nothing but turmoil for investors in the yellow metal.
As I said in a recent commentary, I have lost confidence in the metal as a safe haven investment at this point. I’m not even sure I would enter on the current weakness.
The price chart says “sell.” Follow the trend, and you may be able to squeeze out some profits on an oversold bounce trade; but extending the trend forward, things don’t look good for gold.
Now we will need to see if the precious metal can hold $1,400.
As we move lower, there are now concerns of a meltdown in the gold sector, especially if prices continue to trend lower toward the $1,200 level.
Goldman Sachs, which recently turned bearish and advised shorting the metal, is fearful of gold prices dropping to the $1,200-an-ounce level—as this level also represents the cash cost to produce gold at this point. (Source; Cosgrave, J., “The Scary Number for Gold Investors: $1200,” CNBC, April 15, 2013.)
The $1,200-an-ounce cost of production is clearly an issue, especially for the smaller mining companies that are not as cost-effective or able to survive a cash crunch, compared to the mid- to large-tier producers, like Newmont Mining Corporation (NYSE/NEM). (Read … Read More
Rising Resistance to the Fed’s Easy Money: Time to Scale Back Bond Purchases?
By George Leong, B.Comm. for Profit Confidential
The equities market continues to edge higher, with no apparent evidence of a pending letdown by investors despite the multiyear topping action in the S&P 500.
Once again, I say the rise and support of the stock market is clearly driven by the Federal Reserve’s loose monetary policy. This has been the story behind the upward move in the current bull market. It’s true the domestic and global economies have improved since the Great Recession in 2008, but in my view, it’s nowhere near the level to which we should see the market rise.
The problem that lies ahead is not only the inflated market and a sense of vulnerability as investors let their guard down, but the demand for goods and services could result in higher prices due to the excess in demand over supply. (The rich sure like the easy money. [Read “Higher Taxes: Who Cares? Not the Rich.”]) The end result could be inflation surfacing down the road, and we all know that means higher interest rates.
So while Federal Reserve Chairman Ben Bernanke continues to buy $85.0 billion in bonds each month to drive down longer-term interest rates, enough is enough.
Witness that we are seeing more market watchers and Fed members coming out and expressing the need for the Federal Reserve to at least begin scaling back its bond purchases. The problem is that the Federal Reserve has already said it will not move on interest rates until the country’s unemployment rate falls to 6.5%, and this will not happen for a few years.
In an interview with CNBC, James Bullard, … Read More
Investors Down-Shift Risk, Search for Safety Ongoing Theme for 2013
By George Leong, B.Comm. for Profit Confidential
If the first-quarter earnings season turns out to be as bad as the experts expect, then it may be time to look for safety. That means lightening up the load on high-risk stocks and shifting your focus to companies that you know will be around 50 years from now.
The search for safety appears to be the ongoing theme this year, especially within the blue chip stocks that make up the Dow Jones Industrial Average. The index is up 11.2%, ahead of the broader S&P 500, along with the NASDAQ and Russell 2000.
Small-cap stocks, which have been sizzling on the chart, have been underperforming in the recent weeks, as investors shift to the safety of blue chips and large-cap stocks.
The chart below shows the recent superior performance of the Dow Jones versus the NASDAQ, shown by the blue line, and the Russell 2000, the green line.
Chart courtesy of www.StockCharts.com
After the first week of April, blue chips have fared the best, down just 0.09% as of April 5, which is much better than the decline of 2.94% and 1.96%, respectively, in the Russell 2000 and NASDAQ. As the market risk rises—and I feel it is—I expect to see more money flow from higher-risk investments to lower-risk ventures, such as the blue chips.
The move to Dow blue chips is even more popular, given the dividends available on many of these stocks, which is attractive compared to historically low yields available with bonds.
When you are earning less than one percent on short-term bonds, the choice to look at dividend stocks and the equities market is easy.
The … Read More
Gold’s Decade-Long Reign Near an End?
By George Leong, B.Comm. for Profit Confidential
I have been a major supporter of gold for the past decade during the run-up in prices, but I can’t say I’m that confident at this moment.
Of course, there are still the issues in the eurozone, tension in the Middle East, and the crazy man running North Korea, but I sense the party may be coming to a halt for gold investors.
This is sad, but the shining yellow metal has made money for investors for a decade, so perhaps it’s time to take a siesta.
Here’s my thinking.
The U.S. economy is on the mend. The global economy is recovering; albeit, there are some concerns in China and Europe. The world’s central banks have created a low interest rate environment that has helped to drive global economic renewal and recovery in stocks. It’s all about risk and return at this juncture. While I feel the eurozone could still offer a surprise and America continues to tread on massive debt accumulation, gold is not seen as a viable investment opportunity at this time. Unless the stock market reverses course to the downside, the immediate outlook for the yellow metal looks dull in my view.
Even the recent rally back above $1,600 an ounce on the Cyprus concerns was short-lived and void of any major momentum. There was no reason for the metal to hold above $1,600.
While just recently there was talk of gold retracing back to the high-$1,600 level witnessed earlier in the year, I now feel it could be a challenge for the metal to hold $1,500.
Just take a glance at the chart below. Note the … Read More
As Airline Sector Flies Higher, These Airline Supplier Stocks Look Interesting
By George Leong, B.Comm. for Profit Confidential
The airline sector is sizzling, with rising demand from China and other emerging economies, based on my stock analysis. Revenues in the global airline sector are estimated at $671 billion this year, with profits of $10.6 billion, according to the International Air Transport Association. Plus, my stock analysis suggests that there are significant plane orders flowing in, which you can read more about in “Aerospace: The Only Way Left to Play Global Growth.”
My stock analysis indicates that with the rise in demand, there is also a rise in the need for the materials used to build planes. A key material is carbon fiber—a compound used for applications that demand a high strength-to-weight ratio and rigidity, such as planes.
The global carbon fiber market is estimated to grow annually at 17% over the next five years to around 118,600 tonnes and a market value of about $7.3 billion by 2017, according to The Future of Carbon Fiber to 2017 report produced by Smithers Apex. From 2012 to 2020, the annual growth for carbon fiber-reinforced plastics is estimated at 16%. These metrics make carbon fiber plays an intriguing opportunity, according to my stock analysis.
My stock analysis indicates a potential play in the carbon fiber market for aggressive investors is small-cap special situations play Zoltek Companies, Inc. (NASDAQ/ZOLT), which is still attractive as it nears its 52-week high of $12.25. My stock analysis notes that Zoltek represents an above-average risk-to-reward opportunity in the equities market. (Please note: this is not a buy recommendation, but simply an example of a good investment opportunity for aggressive investors.)
Zoltek’s stock chart, featured … Read More
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