February 11, 2014
- A “no-brainer” trade: The Antichrist ventures back into the gold space
- In search of comic relief from Yellen’s appearance on Capitol Hill
- Small-business owners settle into a new normal
- Specific profits you can make when other people overgeneralize
- The Canadian-American company with a Canadians-only product… firsthand accounts of new customer hassles at the bank…
“The safe-haven premium is back with growth concerns re-emerging,” an analyst at TD Securities tells Bloomberg.
We’ve long mocked the media in their search for handy explanations behind every market move. In the present instance, the template is something like this: “Hey, gold is up $100 over the last six weeks. It must be because…”
At this point, the template involves spinning the wheel or turning the Magic 8 Ball. And any answer is as good as the next…
- “Emerging markets!”
- “A lousy jobs number Friday!”
- “The taper!”
Or all of them, as evidenced by Bloomberg’s lead: “Gold and silver futures capped the longest rallies since August as economic concerns boosted demand for the metals as alternative investments.”
Ah, yes, the catch-all “economic concerns.”
It’s at moments like this we’re grateful we keep trend followers like Greg Guenthner in our employ. The reasons don’t matter to him: It’s all about the price action.
Almost a year ago to the day — Feb. 13, 2013 — gold was having trouble holding $1,650. He said the next stop was $1,550. When $1,550 broke decisively in April, he said, “You must accept the fact that gold has entered a bear market.” On June 11, he said $1,350 was the next line in the sand. By month’s end, it was $1,178.
His long-term call? $1,000.
For his prescience, the true-believer crowd excoriated him. If you see us refer to Greg now and then as the Antichrist… that was one of the more memorable emails.
And now? After that $100 rally in six weeks?
“Gold’s price action is beginning to look much healthier,” Greg writes in this morning’s Rude Awakening.
“It has risen from a low of $1,181 in December to $1,283 in early trading this morning. The hard work is finished. You should look for gold to make a go at $1,300 soon (it hasn’t topped this price since November).
“But if you’re going to throw some money at this emerging trend, there’s only one way to play it…”
“Buy the miners,” says Greg.
“Miners are just now beginning to recover from severe oversold levels. It’s no secret investors have beaten miners into a pulp for the past 18 months. Since late 2012, the gold mining sector plummeted more than 60%. In fact, it wasn’t until January before miners began to show any signs of life at all…”
Since the calendar turned to 2014, miners have outperformed the metal by more than 10%.
“I love trades that are no-brainers,” says Greg — “the huge, obvious moves that are impossible to ignore. If you want to ride this wave, consider buying the Market Vectors Gold Miners ETF (NYSE:GDX). This name broke out above $24 yesterday, setting up a potential run toward an even bigger breakout north of $26.”
[Ed. note: Greg’s paying subscribers got an even more lucrative near-term play this morning. It comes with the daily trading guidance Greg delivers in the PRO version of The Rude Awakening. Start your own “profit chain” for as little as $5 today.]
“I’m not calling an end to gold’s bear market just yet,” Greg told me via IM this morning.
See, this is the nice thing about The 5: You’re privy to in-house discussions our editors sometimes leave out of their own publications.
“I think we’d need at least $1,350 to start considering a much bigger change in trend,” he elaborates. Only then will he buy into the idea that gold made a “double bottom” around $1,180 in June and December of last year.
“It’s entirely possible. But we need a real breakout for confirmation.” So watch $1,350…
Major U.S. stock indexes are all drifting up as traders keep one eye on their screens and the other on Janet Yellen’s first appearance before Congress as Federal Reserve chairwoman. The S&P has crested 1,800.
“Let me emphasize that I expect a great deal of continuity in the [Federal Open Market Committee]’s approach to monetary policy,” she told Congress in a Brooklyn accent little tempered by decades lived in New Haven, Berkeley and Washington.
Really, what else is she going to say? Currency Wars author Jim Rickards said it better, actually…
Indeed, Mr. Rickards’ Twitter feed has been much more lively than the testimony…
We look forward to the release of his new book on April 8. Far more than we look forward to the next Fed meeting from March 18-19.
On the subject of “economic concerns,” they seem to be easing among small-business owners.
The monthly optimism index put out by the National Federation of Independent Business (NFIB) ticked up in January to 94.3. The number is back on the high end of the mediocre range where it’s been stuck for four years…
“NFIB labor market indicators have recently seen a return to normal (but not expansion) levels, encouraging in that reversals are now less likely,” says NFIB chief economist Bill Dunkelberg. For Dunkelberg, that’s a positively giddy assessment.
In the “single most important problem” part of the survey, taxes and regulations remain the clear leaders; poor sales are an increasingly distant third.
“Confusion can be a good thing for investors,” says Chris Mayer. “It helps crack open a gap between perception and reality and can create cheap stocks.”
And goodness knows Chris has had a hard time finding those lately. “I think investors today will find confusion in the turmoil of the European bourses.”
Beware generalizations about Europe — or anything else, he advises: “Anytime you hear someone say ‘European markets are X’ or ‘European stocks are Y,’ you ought to realize the freight that person is hauling. There is a big assumption loaded onboard. It is a blurry coke-bottle view that puts Spain, Germany and France in the same bucket.”
Consider France. “It is expensive to do business there,” says Chris. “It is an economy that has serious problems.”
The Financial Times has the story of a graphic design firm that employed 100 people in 2010 and employs160 today. But all the new jobs are outside France; the owner can hire someone in Portugal at half the cost.
So… Avoid France, buy Portugal, right?
Nope, still too general. Consider the drugmaker Sanofi, headquartered in Paris.
“Less than 10% of sales are in France,” Chris explains. “Only one-third of its business is even in Europe. It is a global business. Yet when the market sold off French banks on credit concerns, Sanofi’s stock went down also.
“So you see the opportunity that confusion can create. The European stock markets have many companies that generate most of their profits outside of the eurozone.”
Chris’ favorite way to play Europe is something you can buy on the New York Stock Exchange. He figures you can sock it away for 10 years and not think about it. (If that sounds like an appealing, no-brainer way to invest, you really need to check this out.)
On the subject of multinational firms identified with their home country… we have the Canadians-only beer fridge.
There it is, in the Canada Olympic House in Sochi. Athletes can drink free after their competition… but only after scanning their passport to confirm their nationality.
It’s the brainchild of Molson… which has been a hybrid Canadian-U.S. firm since merging with Coors in 2005.
“On March 1, Chase is, indeed, barring cash deposits to an account which is not the depositor’s,” a reader writes, corroborating another reader’s account here yesterday.
“They will take checks, but not cash (I forgot to ask about cashier’s checks, money orders, etc.). The excuse was that the new policy is to deal with money laundering… I am sure that a friend across town who owes me $43 and could easily deposit it to my account at a Chase branch near him is a major money launderer.
“According to Chase, this policy will be implemented by all banks in the near future. Well, if JPMorgan Chase can manipulate the precious metals market with the blessing of the powers that be (thank you for your astute votes, sheeple), I suppose that they can help out the NSA by eliminating yet another transparent form of financial transaction.”
“For the last few months,” another writes, “Wells Fargo has asked for account info and ID for foreign currency purchase… even relatively small amounts… no answer when I asked why, if I’m paying the conversion fee and buying with cash.”
“I recently had to wire some funds to my lawyer to close on a condo,” a third chimes in.
“The teller asked me why I was wiring funds.
“When I asked if it was important, she informed me that the policy is new at Wells Fargo, and it is to help safeguard my funds. I smiled at the teller and gave the reason. To me, I was saying Big Brother is wanting to know where all the money is flowing in order to stop large outflows of cash from the U.S. to countries that respect money more than the U.S.”
The 5: We don’t put anything past Big Brother, but we think the explanation given to the first reader is the most likely.
Recall last October when Chase told small-business customers they could no longer wire money overseas. We had our recovering banker Chris Mayer reach out to one of his contacts still in the industry. What he heard back is that, indeed, the pressure’s been amped up to flag cash transactions.
It’s not that there are any new rules; rather, with regulators doling out more fines and penalties to banks in general these days, the banks are eager to look “more” compliant with the money-laundering laws.
“I thought I was the only numbskull to have this plight,” writes one of our regulars. “Our offices manager gets the boot, basically. Oh, excuse me, it was a budget decision. Being the second in command, the reins were given to me.
“Oh, and like yesterday’s contributor, running the office was given to me. No manager’s salary, just run the place on my existing supervisor’s salary. More responsibility and accountability, but not the pay. Twice the headaches and bulls**t, but no extra pay. Would I like another job befitting my skill sets? Of course, but at 58, I am dreaming and, like yesterdays’ contributor, just glad to have that check coming in and my medical insurance. I’m sad to hear I’m not the only one that this has happened to.
“However, my wife and I have been very frugal and scrimped and saved, and hopefully, along with a few Agora subscriptions, I can manage my self-directed funds with your authors’ analysis of good-value companies. I feel we are still on target for an early retirement! Hopefully, there is the proverbial golden cloud on our horizon.”
“Quite frankly,” writes our final correspondent, “I value The 5, but do NOT like having these ‘get rich quick’ schemes pounded at me day after day.
“I may elect to discontinue receiving any Agora reports because I SO dislike your approach. It lacks integrity and character and should be a warning to all to avoid business relationships with your company. I am not arguing that it doesn’t sell and make you money, but it borders on dishonesty. How do I stop any of this bull crap — even the embedded lures — and just get a report?
“You really should be embarrassed by this stuff. It tarnishes your name/reputation and destroys any respect that well-written articles might garner.”
The 5: As a reminder to newer readers, The 5’s analysis is free; specific recommendations come with a paid subscription.
Yes, some of the promotions are downright silly sometimes, even embarrassing. But as our executive publisher and 5 Min. Forecast founder Addison Wiggin reminded me this morning, ours is a “what” business, not a “why” business. As in “what works for readers” — like this, and this.
Communication is a tricky thing in the Internet era; 15 years after the launch of our flagship e-letter The Daily Reckoning, we’re still figuring it out…
Cheers,
Dave Gonigam
The 5 Min. Forecast
P.S. One of the promotions the gentleman responded to was for Options Hotline. We hope he’s been doing well following Steve Sarnoff’s recommendations. So far in 2014, Sarnoff’s delivered average gains of 65% — and two money-doublers this month alone.
The service comes with one of the most straightforward guarantees in the business — which might be one reason it’s met the “what works” test. You can examine it for yourself right here.