Precious Metals
Gold is not the only precious metal we comment on in our Profit Confidential. We also regularly write and analyze other metals such as copper and silver. In fact, our analysis and guidance on the precious metals copper and silver has been right on the money! The unprecedented growth China is experiencing, in our opinion, will lead to generally higher precious metals prices, especially for copper and silver. Start reading Profit Confidential today to see what we have to say about the major precious metals, where we see prices headed, where we find the best investments among precious metals now!
Already Fragile Economy Hit with Falling Retail Sales, Rising Business Inventories
By Michael Lombardi, MBA for Profit Confidential
Gross domestic product (GDP) in the U.S. economy mainly consists of consumer spending. Hence, the more consumers spend and buy, the better our economic conditions become. In 2012, consumer spending in the U.S. economy accounted for more than $11.1 trillion. (Source: Federal Reserve Bank of St. Louis web site, last accessed April 12, 2013.)
Unfortunately, as we finish the first quarter of 2013, economic indicators are suggesting U.S. consumer spending is under severe pressure.
Retail sales in the U.S. economy just took a wrong turn and dropped 0.4% in March from February’s sales. Consumer spending at electronics and appliance stores, health and personal care stores, and general merchandise stores posted a negative growth compared to the same period in 2012. (Source: U.S. Census Bureau, April 12, 2013.)
Similarly, a key indicator of future consumer spending, the Thomson Reuters/University of Michigan’s preliminary consumer sentiment index declined to the lowest point in nine months in April. The preliminary consumer sentiment index registered at 72.3 in April, down from 78.6 in March. (Source: Reuters, April 12, 2013.) Remember: consumers turning pessimistic means a pullback in consumer spending.
At the other end of the equation, we see businesses in the U.S. economy increasing their inventories. According to the U.S. Census Bureau, manufacturing and trade inventories in February of this year edged up almost five percent from a year ago. (Source: U.S. Census Bureau, April 12, 2013.)
Businesses often build up inventories in anticipation of demand, but looking at consumer sentiment and retail sales, I highly doubt that’s the case. It’s actually the opposite; business inventories are increasing because of a lack of demand…. Read More
Base Metal Demand Turning Bleak; Not a Good Sign for Global Economy
By Michael Lombardi, MBA for Profit Confidential
The threat of an economic slowdown in the global economy is increasing each day, but thanks to the optimistic stock markets flaring due to easy money, the threat goes unnoticed.
Copper stockpiles in the London Mercantile Exchange warehouses have reached a 10-year high. Since the beginning of this year, copper inventories have surged 84%. (Source: Wall Street Journal, April 11, 2013.)
According to the World Steel Association, steel demand in Japan is expected to decline (for the second year in a row) by 2.2% in 2013 and a further 0.6% in 2014. Similarly, the use of steel in the U.S. is expected to slow this year compared to 2012. (Source: World Steel Association, April 11, 2013.)
Other base metals, often referred to as “industrial metals,” are witnessing their demise as well. Consider the chart below of the Dow Jones-UBS Industrial Metals Index.
Chart courtesy of www.StockCharts.com
This index, comprising different base metal prices, has been declining since February and has shed more than 11% of its price. Base metals are used in many different industries, and if their demand slows and prices decline, then that’s not a great sign for the global economy.
Dear reader, it’s not a hidden fact: major economic hubs in the global economy are slowing down. In the U.S., we have high unemployment. Once-strong nations like Germany and France are being suppressed by an economic slowdown in the eurozone. Japan is in an outright recession. China’s economy is slowing, too.
After the economic slowdown of 2009, central banks in the global economy were able to inject significant amounts of money into their countries. Looking … Read More
Demand for Silver Coins Jumps 148%; Investors Start Pouring In
By Michael Lombardi, MBA for Profit Confidential
As central banks around the world are now net buyers of gold bullion, I’m getting more bullish on silver. (Don’t get me wrong. I love gold, and I am a big believer of gold prices moving higher.) But gold bullion may have become too expensive for small investors to own…and silver could just be that low-priced alternative for investors to protect themselves from coming inflation.
At present, both gold bullion and silver alike are experiencing significant negative sentiment. In the midst of all this and severe pressure from the bears, the demand for silver hasn’t declined; as a matter of fact, the demand for silver is increasing and robust to say the least.
In February 2013, the U.S. Mint reported that it sold almost 3.7 million ounces of silver in coins. In the same period of 2012, it sold 1.49 million ounces of silver. Simple calculation would show that’s an increase of more than 148% in demand for silver coins in one year! (Source: U.S. Mint, last accessed March 5, 2013.)
Looking at the long-term chart of silver below, we see it is still in a bull market:
Chart courtesy of www.StockCharts.com
Technical analysis of the chart above would indicate a significant amount of support available for silver prices at the $28.00-an-ounce level. This level has been tested multiple times, with silver prices bouncing higher on heavy volume each time $28.00 an ounce was hit.
With central banks around the world printing paper money and working overtime to devalue their currencies, even if they stop now, the damage to fiat currency (and the inflation issues we will have to … Read More
Best Turnaround Trade in Years May Be on the Horizon
By Mitchell Clark, B.Comm. for Profit Confidential
The spot price of oil keeps taking it on the chin, while gasoline prices remain lofty, padding the pockets of the big integrated oil companies even more. What a great business to be in. Which is why, of course, a stock market portfolio should have some exposure to large integrated oil and gas companies.
U.S. domestic oil production continues to experience a renaissance, but Bakken oil stocks aren’t going up with oil prices stuck in the low $90.00s.
I’m still amazed at the strength of the major integrated oil and gas companies on the stock market. Here we have a glut of natural gas and declining oil prices; yet on the stock market, Chevron Corporation (NYSE/CVX) is trading at an all-time record high. Frankly, I like Chevron, and if the stock is at a record high with these fundamentals, just imagine where it will go when the cycle changes.
Speaking of which, a great trade may be coming down the pipeline, and it could be one of those rare buy low/sell high opportunities. The trade is in natural gas. It isn’t going to happen tomorrow, but natural gas prices are going to turn; and when they do, there will be a lot of organic leverage available in the right stocks. I’d be scoping the stock market now for candidates.
One group of stocks that are down right now and worth looking into is the small-cap oil and gas services stocks. Large-cap oil and gas services are doing better on the stock market, but there’s more growth available from Bakken oil and gas services than from in the Gulf of … Read More
China Wants Your Resources
By George Leong, B.Comm. for Profit Confidential
In somewhat of a surprise move, the Canadian government allowed the $15.1-billion takeover of Canada-based Nexen Inc. (NYSE/NXY) by CNOOC Limited (NYSE/CEO) to go through. Initially, it was thought that Canadian regulators and the government would axe the deal, citing the security concerns of a takeover of oil reserves by the Chinese government-controlled CNOOC. Canada has rejected takeover bids from Chinese companies in the past, citing the need to safeguard its mineral and energy resources.
While the Nexen deal doesn’t mean there will be more deals from China to come, it does show the country is hungry to gain access to raw material reserves around the world, as the country is looking to double its gross domestic product (GDP) by 2020. (Read “China’s Golden Years Still to Come.”) China will continue to target global reserves, which in turn, translates into internal exploration and the buying of foreign resource companies.
In 2009 and 2010, Chinese energy firms made about $48.0 billion in acquisitions in North America, according to the International Energy Agency (IEA). The country has investments in the oil-rich Canadian tar sands in Alberta, and I expect to see more Chinese capital flowing in.
According to the IEA, the country has targeted Iraq as its top oil source by 2030. (Source: Xiang, L. and Juan, D., “China to be main buyer of Iraqi oil by 2030, says IEA,” China Daily, November 13, 2012, last accessed January 17, 2013.)
Whether it’s in the Middle East, Africa, or Canada, China wants to and needs to pump up its access to oil reserves, regardless of the location.
Take … Read More
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