I will add this post to the end of my post of the entire Special Report today. I’m also posting it here, however, as a stand-alone so you will get notice in your email box that Move #4 has gone up. Here’s what I posted for Move #4.
Gold for June delivery closed at 2039.00 an ounce on the Comex today. That’s not too far away from the all-time record high of $2,070 an ounce. The move above $2,000 an ounce and any breach of the record at $2070 could trigger a rally as traders short gold buy to cover positions. That could well be true, but I’d note that this forecast of a gold rally is coming from traders long gold who are trying to talk a rally into being.
Today’s Quick Pick is Barrick Gold (NYSE: GOLD). There are three big arguments for owning gold, and Barrick Gold specifically, right now. Number one is that gold always does well when the markets are volatile and people are unsure where else to put their money. Gold is the safe haven. Second, if the Fed pauses rates, gold will be back on the upswing. Gold generally doesn’t pay dividends, so if interest rates are higher, people will put their money where they can get a return through dividends (not gold), but as the rate hikes stop, gold will become more attractive. The third reason is specific to Barrick Gold because although it’s a gold mining company, it gets about 18% of its revenue from the copper it mines alongside the gold. The market for copper has been growing with the renewable energy transition. Electric vehicles use massive amounts of copper and copper miners haven’t been investing to keep up with future demand. Year to date (as of March 10), Barrick was down about 6.81% and Morningstar calculates it as 24% undervalued. While I mentioned that most gold stocks don’t pay a dividend, Barrick actually does, at about 3.23%, and they just announced another $1 million stock buyback. As the turmoil in the market continues, Barrick will continue to go up as people look for a safe haven from the chaos.
Shares of Credit Suisse (CS) fell this morning–if a 31% drop at the worst moment can be called “falling”–after the bank’s biggest shareholder said it would NOT put more money into the challenged bank. As of noon New York time, shares of Credit Suisse were down 24.1%. The bank’s bonds fell to levels that signal deep financial distress, with securities due in 2026 dropping 17.75 cents to 70 cents on the dollar in New York. That puts their yield at about 20 percentage points above U.S. Treasuries.
With the Federal Reserve seemingly winding down its cycle of interest rate increases, a stronger dollar is no longer the big currency market story. Gold is. Gold is back. And for at least the next 3 to 6 months.
Today I posted my two-hundred-and-twenty-sixth YouTube video: Quick Pick Sell UUP. This week’s Quick Pick: Sell UUP–the dollar ETF. I had the Invesco DB US Dollar Index Bullish Fund (NYSEARCA: UUP) in my portfolio through 2022 while the dollar was doing well but the dollar has recently taken a turn South and I’m now saying: Sell. UUP was going up while expectations were that the Fed was going to continue to raise interest rates, but now that the market believes (rightly or wrongly) that the Fed will be slowing their rate hikes, we’ve seen it move down by about 1.22% for 2023. This will likely continue to be the case as other countries maintain steady interest rates or even raise them to fight inflation (Watch the European Union) and as we edge closer to the debt ceiling cliff. U.S. Secretary of the Treasury, Janet Yellen thinks the government can shift things to cover us through June, but after that, if the debt ceiling isn’t raised by Congress, the United States will not be able to borrow enough money to meet all of its obligations. I think we’ll walk right up to that cliff, but I sincerely hope we don’t go over it. For now, I’m selling UUP and I’ll be looking for a gold ETF to replace it. More on that to come!
My one-hundred-and-seventy-first YouTube video: “Trend of the Week The Market is Badly Mispricing” went up today. Market prices say that investors and traders don’t think things are very risky, especially in the long run. Look at the yields on the 10- and 30-year bonds, for example.
Pretty much everything got clobbered today after Federal Reserve chair Jerome Powell promised that the Fed would raise interest rates and keep them high until inflation is under control. In other words, no quick turn to cutting interest rates in the second half of 2023. So chip stocks were down today, August 26, with Nvidia (NVDA) plunging 9.23% at the close. Consumer stocks were down with Shake Shack (SHAK) tumbling 8.61%. Financial technology stocks were down with Block (SQ) shedding 7.72%. Climate change stocks, an extremely hot sector lately, were down with EVgo (EVGO) bleeding 7.86%. Hide in gold? No way. The SPDR Gold Shares ETF (GLD) was down 1.22%. (Better than a poke in the eye with a sharp stick, I suppose.) But agricultural commodity ETFs? Green in a sea of red.
Gold fell below $1800 an ounce this week to close at $1742 per ounce for August delivery on the Comex in New York. And frankly, I don’t see gold turning around until 1) we get a signal from the Federal Reserve that the biggest interest rate increases are behind us, or 2) we get a big, bigger, biggest fear-inducing event that sends everybody scurrying to their hedges. Until then, I think a stronger dollar will continue to pressure gold (and silver) lower.
And there I thought the hard part was laying out my thoughts on the trends in the market over the next five years. Turns out that outlining investment specifics is even harder. So this is just the first 12 months of picks and positioning for the next five years.
The advice is sound, very sound. Move part (at least of your portfolio to cash and sit out the worst of this bear market on the sidelines. And since you have that cash in hand, you’ll be ready to snap up bargains when the market has put in a bottom (or near the bottom, or on the way up from the bottom…or something.) But right now that’s easier said than done.
There were very few places to hide in this week’s stock market decline. A number of the old reliable places to hide aren’t providing much protection in the current stock market drop. But I did see two splashes of green today among the sea of red.
