- Gold survives its latest test: Why now’s a great buying opportunity
- New milestone in subprime auto loans: fraud
- Why tomorrow could be a big deal for biotechs battling cancer
- How legislation could kill California bookstores… suspicion that the ransomware attack is a false flag… the plague of politicians… and more!
Dawn hasn’t broken as I write… but gold appears to have survived its latest encounter with the darkness.
Your editor’s day is off to an even earlier start than usual. I’m headed back to Baltimore for more meetings this week. As I await the first leg of my flight, I’m looking at a chart of gold going back to its bottom near $1,130 at the end of last year.
It’s got those “higher highs and higher lows” over the last five months. That pattern was in danger a week ago… but now the chart action is, as the saying goes, “constructive.” The bid in overnight trading is $1,233.
“Once again, this recent pullback looks like an opportunity for gold investors,” says our income specialist Zach Scheidt.
“Gold pulled back largely due to expectations for higher U.S. interest rates this year. The Federal Reserve is expected to hike rates by 25 basis points (0.25%) when it meets in June, and there is a high probability that there will be another rate hike in December.
“Higher interest rates lead to a stronger U.S. dollar. And logically speaking, it takes fewer ‘strong’ dollars to pay for an ounce of gold. At least that’s the current line of reasoning.”
We like Zach’s caveat there. Because as we pointed out yesterday, the “current line of reasoning” was very different two months ago.
Check out the chart again: Gold bounced of the $1,200 level when the Fed raised rates on March 15. In theory that should have been bearish for gold. But it wasn’t. That’s because in its quarterly projections, the Fed signaled two more rate increases during 2017; the market was counting on three.
So the Fed was signaling less monetary tightening than the market was expecting.
Yes, all this psyching-out and second-guessing between the market and the Fed is preposterous when you think about it. But it’s the world we live in and we ignore it at our own peril.
Here’s another way to think about gold in the present moment: “Remember,” says Zach, “the Fed is largely raising interest rates to defend against inflation. And inflation is the very thing that drives gold prices higher over time.”
The inflation rate has been easing the last couple of months… at least when it comes to consumer prices. But not when it comes to wages… and wages are something the Fed watches very closely.
“Last month, the U.S. economy added more monthly jobs than economists expected,” Zach reminds us. “And the unemployment rate dropped to 4.4%. With jobs plentiful, employers are going to have to start paying up for high-quality workers. And higher wages will add to inflationary pressures — which is bullish for gold.
“So this quarter I’ll be continuing to look for opportunities for us to invest in gold — either through gold miner stocks or with our instant income strategies. And I also encourage you to accumulate physical gold outside of your brokerage accounts as a way to build and protect your wealth.”
[Ed. note: Zach is super-enthusiastic about using gold to generate instant income. And so is our publisher Joe Schriefer.
You don’t think it’s possible? You’ll think otherwise once you watch this demonstration. You won’t believe how simple it can be.]
The U.S. stock market appears set for another positive day. Checking our screens while on layover at Chicago O’Hare, we see Dow and S&P 500 futures slightly in the green. Home Depot delivered an earnings “beat.”
Perhaps the most noteworthy development is that the U.S. dollar index is now the lowest it’s been since Election Day, at 98.5. The dollar’s climb-down since the end of last year is nearly a mirror image of gold’s rise.
April numbers for housing starts just came in: They missed expectations, and by a lot. Permits, a better indicator of future activity, also whiffed. Hmmm…
Later this morning we’ll get the April industrial production; if it’s anything like recent months, it’ll be subpar.
The subprime auto loan fiasco has reached a new low — outright fraud.
Bloomberg recently noted that up to 1% of auto loans might be fraudulent, leading to as much as $6 billion in losses this year. That would be double the 2015 figure.
“In reality, this should not come as a surprise,” says our Rick Pearson, who’s been laser-focused on the subprime auto meltdown for months now. “The exact same thing happened in the housing market in the run-up to the 2008 crash. When companies are willing to give nearly free financing for up to six years to people who clearly have almost no ability to pay for a car, this is what eventually happens.
“In the housing crash, we saw how many small mortgage originators would either turn a blind eye to obvious fraud or even help the applicants dress up their applications with a wink and a nod. We are now seeing the same phenomenon with car dealers. They use an outside finance company, such that the dealers themselves are not on the hook for these losses down the road. All they care about is closing a sale today and getting an immediate commission.”
Every time we bring up the topic, we have to reiterate that the auto loan market is dwarfed by the mortgage market. Subprime auto loans won’t detonate the economy the way housing did a decade ago. But there will be ugly ripples for lenders, for car rental outfits that need to unload used car inventory and for other players. Stay tuned…
Anybody who’s anybody in the world of cancer research will gather here in Chicago in two weeks’ time.
The American Society of Clinical Oncology converges on Chicago every spring. “Many cancer researchers will be spending days there presenting scientific results,” our Ray Blanco explains.
“This includes a great many biotechnology companies — and this is where we can profit. More in-depth data from a clinical trial can really put an upward move on a small biotech that the market has overlooked. And if a biotech is undervalued enough, it doesn’t take much to put us on a path to big gains.”
Thing is, the time to act is not before the conference gets underway — it’s before the research abstracts are published — and that’s tomorrow.
Among the most promising new cancer-fighting technologies Ray will be looking for tomorrow is something called SMDC — small molecule drug conjugates.
“SMDCs join two different compounds together,” Ray explains. “One compound is designed to hone in on a target present on cancer cells. The other is a deadly chemotherapy toxin.
“SMDC technology is designed to be a ‘smart’ chemotherapy — one that concentrates the full killing power of a chemo drug on cancer cells while leaving healthy cells alone.”
Ray has his eye on one company working with SMDC to fight both prostate cancer… and lung cancer. Remarkably, its market cap is less than its cash on the books. Little wonder he added it to the FDA Trader portfolio last week.
As if traditional bookstores don’t already have enough problems in this day and age, California lawmakers appear determined to drive them out of business.
Last year, in the interest of “consumer protection,” the legislature unanimously passed a bill requiring bookstores to jump through nigh-impossible hoops to authenticate autographed copies of books.
Signing sessions by authors are one of the few things traditional bookstores still have going for them that Amazon can’t do. But get a load of the record-keeping this law requires, as described by Consumerist: “Sure there’s the description of the item and the name of the signer, and also the price and sale date. The document must also disclose if the book is part of a limited collection, how many items are in that collection, how they’re numbered and the sizes of any previous or future editions (or a statement explaining that this information is not available).
“But wait, there’s more. The certificate must indicate if the bookstore is bonded, or has insurance to protect against bogus signatures; whether the item was signed in the presence of the dealer (and if so, when and where, along with the name of the witness); whether the item was received from a third party (plus that third party’s name and address). Additionally, bookstores must keep records of these certificates for seven years after sale.”
At least one bookseller is suing, thank God. We’ll track their progress…
“Couldn’t this latest ransomware attack,” begins today’s mailbag, “be used by governments as an excuse to make using Bitcoin and other cybercurrencies illegal?”
Writes another reader: “Look at the real target here. This attack sets up Bitcoin and other cryptocurrencies as ‘for criminals only,’ much like cash. Now just sit back and wait for that drumbeat to get louder and repeated again and again.
“A perfect false flag, no real damage to the elites, lots of media, then comes the drumbeat.
“I have seen this cartoon too many times to laugh.
“Best of luck, and keep up the great work.”
The 5: Conspiratorial, aren’t we?
As we write this morning, the elite narrative appears to be that the ransomware is a North Korea thing because it supposedly has the same digital “signature” as the attack on Sony Pictures in late 2014. We’re still not sure about Sony; back when it was big news we cited experts who said it was more likely an inside job by a disgruntled employee.
(No we’re not going to rerun that photo of Kim Jong Un and his minions staring at the clunky computer today. Too soon.)
“Interesting that Nordstrom’s store sales are down after they said that they would not stock Ivanka Trump clothes,” writes a reader on the topic of the retail apocalypse.
“I just bought a darling jacket of hers from Stein Mart and now am actively looking for more of her clothes! A friend of mine said that she will no longer shop at Nordstrom!”
The 5: Nordstrom isn’t a recommendation of any of our editors, so we haven’t dug into the numbers to say whether there’s any connection.
“The worst thing Donald Trump has done,” our executive publisher Addison Wiggin said in this space last month, “is he’s gotten people interested in politics again.”
And worse, encouraged people to see everything through a political prism.
Which brings us to our next entry in the mailbag…
“I don’t know why you are trying to demonize Obama. With all his faults, he was a far superior leader and president than this selfish and egocentric moron we have now.
“This is not the first time I have read your put-downs of Obama, so we will let it be the last, so just cancel my subscription to your column.”
The 5: We haven’t said anything substantive about Obama in weeks.
Or is it this sales message from our Health Sense Media unit that you’re upset about?
It’s sales messages like those, for a host of subscription services we offer, that pay the bills around here. They’re the reason we don’t have to kowtow to Wall Street advertisers. They’re the reason we can speak our minds freely.
And once again, to the extent we discuss politics here in The 5 — we’d rather not, but sometimes circumstances drag us into the muck regardless — our editorial stance is not only nonpartisan, it’s anti-partisan.
Which reminds us: Years ago some wag commented about how each new president is so horrible he makes you nostalgic for the last one. It’s true. Trump’s look-at-me habit of reveling in chaos and controversies makes one nostalgic for Obama. And Obama talking down to the American people as if we’re all first-year law students made one nostalgic for Bush. And so on…
The 5 Min. Forecast
P.S. Here’s another important development in the gold market — the return of takeover activity.
Yesterday, Eldorado Gold offered to buy Integra Gold — sending Integra shares zooming higher.
Integra happened to be a holding in Rickards’ Gold Speculator With Byron King. Byron urged readers yesterday to take profits — good for a 65% gain in 12 months.
It was right around this time a year ago that takeovers were delivering big profits for investors in junior gold miners. Now’s the time to position yourself for the next wave. For access to Rickards’ Gold Speculator, look here.
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