Back in 2002 the editors of Profit Confidential started telling their readers it was time to jump into gold related investments. This gold investing guidance and analysis proved to be extremely timely. Yes, back in 2002 we started offering gold analysis to our readers and we still do it today. We have been recognized as one of the first investment letters to tell its audience to jump into gold stocks, very early in the gold bull market. The gold guidance and analysis we provided resulted in many stocks we follow rising in price 100% or more in short periods of time. Today, you can regularly find gold market analysis in Profit Confidential. Each time gold prices moved higher, we told our readers to buy more gold related investments. See what we have to say about gold’s future dally in Profit Confidential.
The buy low/sell high investment strategy requires a ton of resolve.
Going against the stock market that just proved an asset is not attractive is not only risky, but it is counterintuitive to the emotional decision-making that takes place in financial markets.
I always scan the stock market for positions at their 52-week lows.
The reason for doing this is twofold: 1) to identify potentially attractive buy low/sell high assets; and 2) to assess what Wall Street dislikes for the purpose of honing my market view.
What you want to look for isn’t a company that is going broke or whose business plans have failed, but a large-cap, brand-name company—a leader within its industry that is down on the stock market for its own specific set of reasons.
One company that exemplifies the scenario I’m describing is Barrick Gold Corporation (NYSE/ABX).
This blue-chip gold producer has been having a very tough time on the stock market. The position is down another 10 points since April and has been cut in half since last November.
Barrick Gold’s stock chart is below:
Chart courtesy of www.StockCharts.com
Barrick Gold looks like a good buy low/sell high trade candidate. But obviously, there are two immediate explanations as to why the position just bounced off a major low: weaker gold prices and rising production costs.
The company did particularly well on the stock market between the mid-1980s and mid-1990s. Then it took a break for a good 10 years, doing nothing except paying its dividends.
I would now keep a sharp eye on Barrick Gold for a buy low/sell high trade. But here’s the thing: … Read More
In the first quarter of 2013, real personal disposable income (the amount of money the average American has left after paying taxes) in the U.S. economy decreased 5.3% compared to the same period of 2012.
As consumers in the U.S. economy experienced a contraction in their income, their expenses increased. Personal outlays increased 4.1% in the first quarter of 2013 compared to the first quarter of 2012. As a result of contracting income and rising expenses, the personal savings rate compared to disposable income in the U.S. economy was only 2.6% for the first quarter of 2013.
Similarly, private businesses in the U.S. economy are seeing their inventories rise. Businesses increased their stockpiles by $50.3 billion in the first quarter of 2013, $13.3 billion in the fourth quarter of 2012, and $60.3 billion in the third quarter of 2012.
What all of these numbers show is that consumers in the U.S. economy are struggling and businesses are not selling. This phenomenon is further proven by the corporate earnings of companies in the key stock indices; while many are beating their profit targets, only a handful are meeting their revenue expectations.
The U.S. economy is consumer-focused—consumer spending makes up a huge chunk of our gross domestic product (GDP). Consumers in the U.S. economy are in pain. We have wages that are declining, expenses that are rising (thanks to the weakening value of the U.S. dollar and rising inflation due to too many new printed dollars in the system), savings that are falling, and an unemployment rate that remains high.
As I have been saying, real economic growth takes place in a … Read More
While the bears continue to report that gold bullion has no future, retail investors and central banks seem to be rushing to buy more. In fact, the decline in gold bullion prices has provided them with another buying opportunity.
The recent selling in gold bullion—the moment which separated the men from the boys—caused a panic. Those who were speculating in gold got out as their losses added up.
What I believe still holds true is the fact that the fundamentals that drove gold bullion prices are still in place. Central banks are still buying gold—they have not shied away from gold bullion as prices declined from their 2011 highs.
Consider the central bank of Russia. According to the International Monetary Fund (IMF), Russia increased its gold bullion holdings in March for the sixth month in a row, buying an additional 4.7 metric tons of the metal, bringing its total gold bullion holdings to 981.6 tons. Russian gold bullion holdings have increased 2.5% so far in 2013; in 2012 they increased 8.5%. (Source: Bloomberg, April 25, 2013.)
The central bank of Kazakhstan increased its gold holdings in March by buying 1.2 tons of gold bullion. In 2012, this central bank increased its gold reserves by 41%; this year, its holdings are up by 6.6% already.
Turkey’s central bank has been on a gold buying spree for nine months. In March, it bought 33.1 tons of gold bullion, brining its total holdings to 408.9 tons.
Many smaller central banks are buying gold bullion too. For example, the central bank of Azerbaijan has been buying gold and adding more to its reserves … Read More
As of April 22, 67% of the companies in the key stock indices that reported their corporate earnings were able to beat earnings estimates, but only 44% of them were able to exceed the revenue expectations of Wall Street analysts. (Source: Reuters Alpha Now, April 22, 2013.)
Looking at all this, you have to ask: why are the key stock indices rising when the underlying reasons for their rise (corporate earnings and growth) are diminishing?
The key stock indices aren’t climbing because of fundamental reasons. The harsh reality is that the yields from other investments are too low, so investors are forced to take higher risks to earn a decent rate of return. Just look at the yields on bonds of stronger governments around the world—most are barely beating inflation.
Even the most conservative investors, central banks, are rushing toward the stock market. According to a survey done by Central Banking Publication and Royal Bank of Scotland Group PLC of 60 central banks, 23% of them said they either own equities or plan to purchase them in the future. (Source: Bloomberg Businessweek, April 25, 2013.)
The central bank of Israel bought stocks for the first time last year. Similarly, the central bank of Switzerland and the Czech National bank have increased their stock holdings to at least 10% of their reserves.
The Japanese central bank has done the same. The Bank of Japan, the central bank with the second most reserves, expects to boost its holdings of equity exchange-traded funds (ETFs) to 3.5 trillion yen (about US$35.2 billion) by 2014.
Dear reader, central banks around the world usually … Read More
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